Small Business

The instant asset tax write-off explained

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The Australian Government continues to announce financial relief from the coronavirus-induced downturn for businesses. The instant asset write-off increase is a great opportunity for small businesses and sole traders. Here’s a look at what the instant asset write-off is, what’s changed, and what it could mean for your business’ finances.

Our obligatory disclaimer: the information on this website is for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered legal practitioner or financial or investment adviser.

What’s changed?

  • The write-off has increased from $30,000 per asset to $150,000 per asset
  • The threshold for access has increased from businesses turning over less than $50 million annually to less than $500 million
  • At this stage the write-off is available until 30 June 2020

What is the instant asset write-off?

The instant asset write-off is the government’s way of encouraging small businesses to invest in big ticket items. It allows businesses to increase their immediate cash flow by paying less tax.

Previously, you had to write an asset off across the life of the asset itself. Eg: If you bought a ute and used it for 8 years, you had to claim it proportionally each year. With an instant asset write-off, you get the benefit immediately.

How do I access it?

Speak to your accountant before making a purchase to make sure you apply. Then, keep your receipts and submit them to your accountant when tax time comes around. For now, the instant asset write-off increase will be available until 30 June 2020.

What can I buy?

Provided the individual asset or item costs less than $150,000, and it’s being used immediately or installed for use, small businesses can invest in new vehicles, tools and equipment, office furniture, computer equipment or even solar panels. As long as the asset relates to your business in some way, you’ll be able to claim.

Does this mean I get $150,000 back?

Unfortunately not! The instant asset write-off just reduces the amount of tax your business pays.

Remember that if you’re splitting an asset like a car across your business and personal life, you’re only able to write off a percentage of the cost that applies to the business.

For example, if you buy a $100,000 ute and use it at work (60%) and home (40%), you can only write off $60,000.

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