An instant asset write-off allows small businesses to claim immediate deductions for new or second-hand plant and equipment asset purchases such as vehicles, tools and office equipment. The assets must first be used, or installed for use, in the income year you’re claiming for.
The amount you can write-off will depend on when the asset was purchased and the associated threshold amount.
From 7.30pm (AEDT) on 2 April 2019 to 11 March 2020 the Government allows businesses with an annual turnover of less than $50 million to immediately write-off (expense) any purchases of items $30,000 and under.
From 12 March 2020 until 31 December 2020, as a result of the Coronavirus pandemic, the Government announced changes to the instant asset write-off: the threshold amount for each asset is now $150,000 (up from $30,000), and eligibility has been expanded to cover businesses with an aggregated turnover of less than $500 million (up from $50 million).
If you buy an asset that comes under the threshold, you can claim the business portion of the asset’s use in your tax return for that financial year. You can claim a deduction for multiple assets as long as the cost of each individual asset is less than the relevant threshold.
As a practical example “Joe Bloggs Grocery Supplies Pty Ltd” is presently looking to report a net profit for the June 2020 financial year of $60,000 – which they will end up paying tax of $16,500 on (at the adjusted company tax rate of 27.5%). If Joe was to purchase or finance (through a Chattel Mortgage) two items valued at $30,000 each totalling $60,000 prior to June 30 – he will completely offset his profit and not pay any tax for that year.*
This example would provide Joe with $16,500 of savings back to his business through reduced tax – which could be used to effectively purchase equipment or more than cover the interest costs to finance the equipment purchased.
For more information on the instant asset write-off visit the Australian Taxation Office website.
How can we help you to get the Immediate Tax write-off:
You don’t need to have the cash to go out and buy equipment to get the write-off. Geared can assist you with a Chattel Mortgage Loan facility – which will allow you to qualify for the immediate tax write-off.* With a Chattel Mortgage, you “own” the equipment immediately, so it’s recorded in your business in the same way as a cash purchase. If financed through a Rental (Operating Lease) or Finance Lease, the purchase will not qualify for the Immediate tax write-off.
* This information does not constitute taxation advice and does not take into account your own individual financial circumstances. Please refer to your Accountant for taxation advice and information around whether you may qualify for the Instant Tax Write off.