Instant Asset Write-Off Increased

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Updated: October 23, 2020

Measures extended for a few months, until December 31, 2020.

In the wake of the COVID-19 pandemic, the federal government had both increased the instant asset write-off threshold and expanded business access, and it has advised that it will be extending these measures for a few months through to December 31, 2020.

The move is designed to support business investment, with the instant asset write-off threshold having been increased from $30,000 to $150,000, and expanded to include businesses with an aggregated annual turnover of less than $500 million (up from $50 million).

Previously in this series, Finlease Founder and CEO Mark O’Donoghue has noted brokers should be advising their clients of the potential to immediately claim the cost of a piece of machinery “as a deduction on their profit/loss account, despite the fact that they might put it on finance over five years”.

“However, it would be important to use a chattel mortgage, where you are shown to be the owner from a tax point of view, as opposed to a lease, where you’re not the owner, because you’ll miss out on the depreciation,” Mark told ACM.

Certainly, for the remainder of the year it is worthwhile keeping in mind that there is further scope for businesses to potentially benefit under the amended instant asset write-off criteria.

Business Eligibility

The federal government had originally introduced the changes to the instant asset write-off earlier in the year as part of a range of measures designed to support the economy in dealing with the challenges brought about by COVID-19.

As advised via the business.gov.au website, the higher threshold for new and second-hand assets “provides cash flow benefits for businesses that will be able to immediately deduct purchases of eligible assets each costing less than $150,000”.

The threshold is applied on a per asset basis, with eligible businesses able to immediately write-off multiple assets, with business.gov.au advising that eligibility depends on:

  • Aggregated Turnover – comprising the total ordinary income of a business and of any associated businesses
  • Date of Purchase – when the asset was purchased and when it was first used or installed ready for use
  • Cost – the cost of each asset being below the threshold

The federal government has advised that the extended time frame will provide further opportunity for businesses to invest in assets amid the reopening of the economy and the easing of health restrictions, following through with planned investments, and providing incentive to bring investments forward.

What Businesses Should Keep In Mind

The criteria for the instant asset write-off have been changed a number of times  in recent years, and it is important that workshops considering using it confirm the thresholds and check that they are eligible.

Of course, it is worthwhile seeking out expert advice if in doubt about any aspect of the instant asset write-off and how it applies to your business, and to confirm what the best path forward for your business will be.

Further information about the instant asset write-off and examples of how it can be applied can be found at the www.business.gov.au website and at the ATO website.
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