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.
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.
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.
COVID-19 has caused widespread business disruption across industries. In response, the government has made tax changes that could affect how you approach your EOFY preparations.
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To determine eligibility for an instant asset write-off, you need to look at:
Multiple assets can be claimed as long as the business and each asset meet the above eligibility requirements.
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.
The following assets are excluded from the scheme:
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