An Instant Asset Write-Off guide for businesses
The Australian government has extended the Instant Asset Write-off scheme. It now applies to all businesses with a turnover of up to $5 billion and is available until 30 June 2022.
Originally slated to end in December 2020, the extended Instant Asset Write-off scheme now has more generous qualifying criteria. This means more businesses are now eligible.
The Government predicts that the expanded scheme will help some 3.5 million businesses nationwide.
Am I eligible?
Eligibility to use instant asset write-off depends on:
- your aggregated turnover (the total ordinary income of your business and that of any associated businesses)
- the date you purchased the asset and it was first used or installed ready for use
What businesses can claim and how much?
- Businesses with a turnover of up to $5 billion will be able to immediately deduct the full cost of eligible depreciable assets acquired from 7:30pm (AEDT) on 6 October 2020 and first used or installed by 30 June 2022.
- The cost of improvements to existing eligible depreciable assets made during this period can also be deducted in full.
- The full write off also applies to second hand assets for small and medium sized businesses with annual turnover of less than $50 million.
Which assets are eligible?
The types of assets that the expanded Instant Asset Write-off scheme applies to include:
- Vehicles used to conduct business
- Many types of office furniture
- Computers and related equipment
- Mining equipment
- Certain kinds of machinery and equipment
Which assets are excluded?
There are a number of asset types that are excluded from the Scheme, including:
- Any depreciating asset leased out to a 3rd party for more than 50% of the time
- Assets considered low-value and allocated as such before simplified depreciation
- Horticultural plant as defined by the ATO
- Software used for development of other in-house software
- Capital works such as building additions, alterations, structural improvements and earthworks
How do I apply?
There is no need to apply for eligibility; your write-off will be applied automatically in your tax return.
What will the process look like?
You can write off the value of many types of assets — including vehicles, point-of-sale devices, security systems and other qualifying equipment - used in your business. The value of the write-off is based on your tax rate.
Remember to factor in how much these items might be used for personal reasons, and deduct that value from your Instant Asset Write-off claim accordingly. For example, if you plan to use a $40,000 vehicle for personal driving about half the time, you will only be able to claim $20,000 of the cost.
What's best for me ?
Business tax considerations can be complicated. You should consult your accountant or tax professional to find out the tax arrangements that are the most suitable for your needs.
If you wish to finance the acquisition of an asset and claim the Instant Asset Write-off, Earlypay has competitive finance solutions that can preserve cash-flow and unlock capital to help your business grow.
Get in touch with us today to learn more about what we can do for you
DISCLAIMER: This article is for general informational purposes only. It is not financial advice. You should consult your accountant or tax professional on the tax treatment of any asset used in your business.
