Taxation & Tax Tips

This one is a gem for Small Business Entities.

The Government recently released news that they will be extending the $20,000 instant asset write off threshold, for businesses with less than $10 million in turnover until 30th June 2019.

So what does this actually mean?

Are you eligible?            

And what assets are included?

What is the $20,000 Instant Asset Write-Off and how does it work?

We all know tax breaks for small businesses are rare. But this one is a gem!

This tax concession means you can decrease your tax payable, by spending up to $20,000 on eligible business assets and therefore reduce your taxable income by that same amount.

The ATO states, these business assets need to be acquired between 1st July 2017 and 30th June 2019 and first used or installed, ready for use by 30 June 2019 for taxable purposes.

How does it work?

For any assets that decrease in value over time, such as vehicles, computers, tools and office equipment, most small businesses can claim some depreciation on that asset each year.

For example, if the asset is expected to last 10 years, you can claim depreciation for 10% of its costs each year.

The Instant Asset Write- Off Scheme allows Small Business Entities (SBE’s) to claim 100% of the deprecation in one lump sum, rather than smaller percentages every year.

The website states that “it means that you can reduce your taxable income, and your tax payable, in the financial year that you bought and installed them”. So as long as you have the capital and the cash flow to enable you to spend the $20,000 in the first place, this is a great way to invest in equipment for your business and decrease your taxable income.

Furthermore assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the general small business pool (the pool) and depreciated at 15% in the first income year and 30% each year thereafter.

The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools).


Are you eligible?

If your business turns over less than $10 million per year, you are eligible.

What assets are eligible?

The assets you purchase as part of the Instant Asset Write-Off can be new or used. There are some exemptions to eligible assets, so we suggest you speak to a tax accountant to confirm your purchase meets the criteria, however some of the assets available for the $20,000 Instant Asset Write-Off Scheme are:

  • Desktop Computers
  • Laptops
  • Work vehicles
  • Tradie tools
  • Machinery
  • IT Hardware (printers, photocopiers, hard drives)
  • Office, studio and shop furniture and fittings
  • Equipment Storage (storage containers)
  • Kitchen equipment
  • Signage
  • Air conditioners

Although this tax deduction scheme sounds too good to be true it can be a smart way to purchase your business assets. However it’s not for everyone and we recommend consulting with with us prior to any proposed purchase so you can go through some of the finer details you may need to be aware of.

Some important things to remember are:

  • The asset can be second hand or new, however it needs to be “new” to your business.
  • The deduction needs to be made in the same financial year the asset is first used or installed in your business.
  • You can only claim for the “taxable purpose proportion”. In other words if you only use the asset for 20% business purposes then you can only claim 20%.
  • You can purchase as many assets as you like however each asset must cost less than $20,000 (ie. up to $19,999).
  • Also remember, although it’s called the “Instant” Tax Write-Off Scheme, this relates to lumping the depreciation claim into the one claim. This doesn’t mean you will see the benefit “instantly”.

Small businesses need to have the cash flow to enable them to cover the time between receiving the benefit and purchasing the asset. If you need help with the Instant Asset Write Off Scheme or any other Tax Deductions at tax time this year please call our office on (02) 4353 2333.

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