Instant asset write-off for small to medium businesses

By Sheree Cant - April 12, 2019

Last week’s Federal Budget not only contained an announcement in relation to the extension of the instant asset write-off for small businesses (those with a turnover of less than $10m) but also extended the measure to medium sized businesses. These measures were swiftly passed by Parliament and are now law, creating a three-tiered system for claiming deductions on asset purchases.

Under the law which existed prior to these measures, Small Business Entities (SBE’s), were entitled to claim an immediate deduction for eligible asset purchases costing less than $20,000, up until 30 June 2019.

In January 2019, the Government announced an extension of this concession until 30 June 2020 and an increase in the threshold to $25,000, effective from 29 January 2019. The Budget announcements and resulting legislation, which applies from 7.30pm on 2 April 2019, increased the threshold to $30,000 and extended the measure to include medium sized businesses (i.e. businesses with turnover exceeding $10m but less than $50m).  

Deductions for the 2019 and 2020 income years

Business taxpayers are now able to claim an immediate deduction in the year of purchase in accordance with the following:

Date the asset was first used or installed ready for use

Instant asset write-off threshold

Eligible taxpayers

1 July 2018 – 28 January 2019

$20,000

Small business entities (aggregated turnover less than $10m)

29 January 2019 – 2 April 2019

$25,000

Small business entities (aggregated turnover less than $10m)

2 April 2019 – 30 June 2020

$30,000

All businesses with an aggregated turnover of less than $50m.

From 1 July 2020

$1,000*

Small business entities(aggregated turnover less than $10m)

*Instant asset write-off threshold reverts to $1,000 unless extended again. Medium businesses will revert to the usual depreciation provisions.

Points to note

  1. The above thresholds are exclusive of GST. The GST-inclusive cost of the asset can therefore exceed the threshold but the GST exclusive cost must be less than the threshold;
  2. If SBE’s wish to utilise the instant write-off concession, they must also use the other SBE depreciation concessions (i.e. pooling of assets). Medium sized businesses will continue to depreciate assets costing $30,000 or more under the usual depreciation provisions.
  3. When an asset deducted under the instant asset write-off concession is sold, the entire proceeds are assessable in the year of the sale;
  4. The instant asset write-off concession is a tax deduction, not a rebate of tax. Spending $20,000 on a qualifying asset reduces your taxable income. It does not result in a tax rebate or refund of the amount spent. The tax impact of the deduction will vary according to your tax rate.
  5. Given the various dates and thresholds which apply, it is important that the date you first used or installed the asset for use is recorded. This may not necessarily be the purchase date.

If you have any questions in relation to the write-off, please contact your Pitcher Partners representative.


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