Managing costs

How to use the new instant asset write-off 

If you’re a small business owner and haven’t used the instant asset write-off, you might be missing out. The government scheme was introduced in the 2015/2016 federal budget and has been benefiting businesses ever since.

In March 2020, however, prompted by the coronavirus pandemic, new thresholds for the scheme were temporarily introduced, allowing businesses to write-off higher-value assets. Ahead, we break down everything you need to know.

What is an instant asset write-off?

In a nutshell, it’s a government initiative that allows businesses to claim immediate deductions for new or second-hand plant and equipment asset purchases that are under the threshold amount. Assets can include computer hardware, vehicles and office furniture, among other things.

What’s changed due to the pandemic?

From 12 March 2020 until 30 June 2020, the instant asset write-off threshold amount for each asset has been increased from $30,000 to $150,000.

Also during this period, eligibility has been expanded to cover businesses with an annual turnover of less than $500 million. Previously, the turnover limit was $50 million.

From 1 July 2020, the instant asset write-off threshold will again be reduced, only made available to businesses with an aggregated turnover of less than $10 million.

The threshold amount for assets will also be reduced again, down to $1,000.

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Which assets are eligible?

To determine eligibility for an instant asset write-off, you need to look at:

  • your business’s total income and that of any associated businesses
  • the cost of the asset being under the threshold amount
  • the date you purchased the asset
  • the date it was first used or installed.

Multiple assets can be claimed as long as the business and each asset meet the above eligibility requirements.

What if my asset cost is greater than the threshold?

If your asset is above the threshold purchase amount, you can add it to your small business asset pool where you can claim gradual deductions, also known as depreciation, each year. 

What’s excluded?

The following assets are excluded from the scheme:

  • horticultural plants
  • software allocated to a software development pool
  • assets that are or are expected to be leased out for more than 50% of the time on a depreciating asset lease
  • assets you allocated to a low-value assets (pool) before using the simplified depreciation rules
  • capital works deductions.

How can you make a claim?

The cut-off date to purchase assets and take advantage of the temporary increased thresholds is 30 June 2020. You will then be able to claim the business portion of the asset’s use in your tax return for 2019/2020 financial year.

To work out how much you can claim, you must subtract the private use portion. Generally, the balance is then the taxable purpose portion.

As with all tax claims, you won’t get a monetary refund, but you will be able to reduce the amount of tax your business has to pay.

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*Based on 958 meters switched between 1 July 2019 to 3 April 2020