Instant Asset Write – Off for Businesses
Using the instant asset write-off, eligible businesses are able to claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used, or installed ready for use.
The instant asset write-off can be used for:
– multiple assets so long as the cost of each individual asset is under the relevant threshold
– new and second-hand assets
Note: the instant asset write – off cannot be used for assets that are excluded from the simplified depreciation rules such as: assets that are leased out for more than 50% of the time on a depreciating asset lease, software allocated to a software development pool, or capital works deductions.
The eligibility criteria for the instant asset write – off and threshold have changed over time. So it’s essential you check your business’s eligibility criteria and apply the correct threshold amount. This will depend on when the relevant asset was purchased or first installed and usable.
From the 12 March 2020 until 31 December 2020 the instant asset write – off threshold amount for each asset is $150,000 (increased from $30,000). In addition, the eligibility has been expanded to cover businesses with an aggregated turnover of less than $500 million (up from $50 million).
Eligibility to use the instant asset write – off on an asset depends on:
– your aggregated turnover
– the date the asset was purchased
– cost of the asset being below the threshold
– when the asset was first used or installed ready to use
For small business owners who choose to use the simplified depreciation rules, you must use the instant asset write – off on all eligible assets.
If your business has an aggregated turnover of $500 million or more, you are not eligible to use the instant asset write – off.
As of next year, from 1 January 2021, the instant asset write – off will only be available for small businesses with an aggregated turnover of less than $10 million.
|Eligible businesses||Date range for when asset first used or installed and ready to be used||Threshold|
|Less than $500 million aggregated turnover||12 March 2020 to 31 December 2020||$150,000|
|Less than $50 million aggregated turnover||7:30pm (AEDT) on 2 April 2019 to 11 March 2020||$30,000|
|Less than $10 million aggregated turnover||29 January 2019 to 7:30 pm (AEDT) on 2 April 2019||$25,000|
|Less than $10 million aggregated turnover||1 July 2016 to 28 January 2019||$20,000|
|Less than $2 million aggregated turnover||7:30pm (AEST) on 12 May 2015 to 30 June 2016||$20,000|
|Less than $2 million aggregated turnover||1 January 2014 prior to 7:30pm 12 May 2015||$1000|
|Less than $2 million aggregated turnover||1 July 2012 to 31 December 2013||$6,500|
|Less than $2 million aggregated turnover||1 July 2011 to 30 June 2012||$1,000|
Source: Threshold information retrieved from the ATO
Exclusions and limits
There are a small number of assets that are excluded. Click here to find out more about exclusions from the instant asset write – off.
A car limit applies to the cost of passenger vehicles (except a motorcycle or similar) designed to carry a load less than one tonne and less than nine passengers. The one tonne capacity refers to the maximum load your vehicle can carry, also known as the payload capacity.
The payload capacity is the gross vehicle mass (GVM) as specified on the compliance plate by the manufacturer, reduced by the basic kerb weight of the vehicle.
The basic kerb weight is the weight of the vehicle with a full tank of fuel, oil and coolant together with spare wheel, tools (including jack) and factory-installed options. This does not include the weight of passengers or goods etc.
– Payload capacity = GVM – basic kerb weight
The car limit is:
– $57,581 for the 2019–20 income tax year
– $59,136 for the 2020–21 income year.
The instant asset write-off is limited to the business portion of the car limit for the specific income tax year. For example, the car limit is $57,581 for the 2019–20 income tax year. If you use your vehicle for 75% business use, the total you can claim under the instant asset write-off is 75% of $57,581, which is $43,186.
You cannot claim the excess cost over the car limit under any other depreciation rules.
Work out your deduction
The total cost of the asset must be less than the designated threshold, not including any trade-in amount. Depending on if you are registered for GST, the threshold may be inclusive or exclusive.
To calculate the amount you can claim, it is essential that you subtract any private use portion. The balance (the portion you use to earn assessable income) is generally the taxable purpose portion (business purpose portion). You can only claim the taxable purpose portion as a deduction, however, the total cost of the asset must be less than the relevant threshold.
If you need further assistance with navigating the instant asset write – off, feel free to get in touch below with the friendly team at 5ivestar.
5ivestar Business Services are tax agents located in Carina Heights on Brisbane’s Southside. We service all areas of Brisbane, Ipswich and the Sunshine Coast for tax, BAS and bookkeeping. We also practice as virtual CFOs, take on interim CFO engagements as well as financial management, reengineering and restructures including business turnarounds and transformations and expert financial modelling.
Let’s chat about your business today https://5ivestar.com.au/contact-us
P: 07 3084 3692