Are you aware of the ATO’s Instant Asset Write-Off Thresholds? 

Are you thinking of buying some new assets for your business?  Are you aware of the ATO’s Instant Asset Write-Off?  The instant Asset write-off threshold was expanded to cover all assets purchased for $150,000 or under from 12 March 2020.  At the moment this ends 30^th June 2020

By using the instant asset write-off, small businesses can claim a deduction for each asset that costs less than the threshold that applied when the asset was first used or installed ready for use. There are different thresholds which apply so remember to check the date you purchased the asset to check the threshold before claiming it on your tax return.  The dates each threshold came into effect are as follows:

• $150,000 from 12 March 2020 to 30 June 2020 then back to $30,000
• $30,000 from 2 April 2019
• $25,000 from 29 January 2019
• $20,000 from 12 May 2015
• $1,000 from 14 January 2014

These are the questions we are regularly asked…….

What if our business is registered for GST?

If you are registered for GST, then the overall cost of the asset increases to $165,000 as the business can claim $15,000 as an input tax credit.

Does it matter what type of business structure you have?

No you can be a sole trader, partnership, company or trust.

How many assets can a business purchase under this scheme?

You can claim multiple assets under the immediate asset write-off scheme providing that the total for each asset is less than the relevant threshold on the date you purchased it.  Assets that cost more than the relevant threshold can’t be immediately written off however, you can deduct them over time using regular depreciation methods.

Do the assets need to be new or can it be a second hand item?

No, you can purchase both brand new or second hand assets and claim them under the Instant Asset Write.  Some exclusions & limits do apply.  For example, if you purchase a car for your business, the instant asset write-off is limited to the business portion of the car limit of $57,581 for the 2019–20 income tax year.  You cannot claim the excess cost of the car under any other depreciation rules.

How is this different from the previous asset deduction rules?

The main difference is that prior to this, businesses were only able to instantly write off assets up to $1,000 in past years. Assets that cost more than $1,000 were only able to be written off partially every year, in accordance with the relevant depreciation rate for the class of asset.  Since the introduction of the Instant Asset Write Off rules the instant asset write off has increased in recent years. Businesses can now write off the cost of the asset (according to the thresholds) in the same financial year as they purchased it if the purchase price is less than the recent increased thresholds.  This is instead of the ongoing depreciation rules that previously applied.

It’s also worth remembering that these asset purchases, when immediately written-off, are deducted directly from your profit which means less taxable income!  We would like to stress though that you should never buy an asset just to utilise the scheme.  If you don’t need it or cannot afford it, DON’T BUY IT!

If you have any questions about the ATO’s Instant Asset Write-off please do not hesitate to give us a call and we would be happy to help you with your query.

– Dean Kennedy