Ever since the announcement of an increase to the instant asset write-off, small business owners around Australia have been celebrating the opportunity to invest in their businesses without a huge strain on their financial budgets.
However, with all the changes that were made to the instant asset write off over the years, not everyone is entirely sure of the eligibility criteria anymore. And that’s not surprising given just how many changes have been made to it since it was first introduced in 2015.
In this article, we’ll take a look at the instant asset write-offs (yes, there’s more than one!), what the new changes mean to small businesses, and the eligibility criteria.
There are actually three write-offs currently in use
The instant asset write-off was first presented on 12th May 2015 with a threshold of $20,000, and any purchase that exceeds the threshold was only able to be partially written off every year, in accord with the depreciation rate of the asset.
The write-off was also only available to businesses with an annual turnover of less than 10 million. Subsequently, on 29th January 2019 the government increased the threshold to $25,000 and extended the expiry date to June 2020. All other conditions remained the same.
After the introduction of the new scheme on 2nd April 2019, the threshold was once again increased to $30,000 and in addition to that, businesses can claim a substantial tax break per asset in the same financial year, instead of depending on the depreciation rule, which still applies to assets greater than $30,000.
Which one are you eligible for?
Businesses can apply for either one of the tax breaks, depending on when they purchased an asset. Essential, assets purchased from 12th May 2015 to 29th January 2019 can claim the $20,000 write off while assets purchased from 29th January to 2nd April 2019 can apply for the $25,000 write-off. All purchases after 2nd April 2019 are eligible for the $30,000 instant asset write off as long as they are under the threshold.
The increased threshold will allow greater investment opportunities toward innovative changes and reforms across several industries, while reducing some of the financial strain.
Medium sized businesses are also included
In an effort to provide support to more businesses, the government has changed the annual turnover limit from $10 million to a turnover of less than $50 Million. This means more medium businesses can now take advantage of the instant asset write off scheme.
The inclusion not only positively affects SMEs financially but also encourages more businesses to fast track their growth and investment schemes without fear of high taxes to come.
What assets are eligible under the write-off?
The asset should be a depreciating asset that’s purchased for use at your place of business. For example, a vehicle or office equipment such as photocopiers, laptops etc. However, the write-off also covers assets like software updates, patents, investment on websites and digital technology among others.
Second-hand items can also be claimed as long as they are relevant to your business. The assets must be ready for immediate use to be eligible for the write off. That means the asset must be installed, in-use or ready for use after purchasing in the same financial year.
In today’s digital age, the internet has completely transformed the way consumers interact with businesses, especially for small businesses. The instant asset allows more businesses to capitalise on a good digital presence and develop a new digital strategy by investing in innovative solutions for their respective businesses.
We don’t know whether the current scheme will be extended after its scheduled expiry date (June 2020). But, given how much you can do with the instant write off, we feel this is the perfect opportunity to invest in digital innovations that will further boost your business’s web presence and drive revenue well into the 2020’s.
Please speak to your tax accountant for all tax and investment related advice. Information provided above does not constitute advice.
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