Instant asset write-off and Backing Business Investment
Instant asset write-off for eligible businesses
Small to medium-sized businesses are being reminded there are just weeks remaining to make the most of the government’s increased instant asset write-off offer.
Under instant asset write-off eligible businesses can:
- immediately write off the cost of each asset that costs less than the threshold
- claim a tax deduction for the business portion of the purchase cost in the year the asset is first used or installed ready for use.
Instant asset write-off can be used for both new and second-hand assets. Some exclusions and limits apply.
The instant asset write-off eligibility criteria and threshold have changed over time. You need to check your business’s eligibility and apply the correct threshold amount.
Changes from 12 March 2020
From 12 March 2020 until 30 June 2020 the instant asset write-off:
- threshold amount for each asset is $150,000 (up from $30,000)
- 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 depends on:
- your aggregated turnover (the total ordinary income of your business and that of any associated businesses)
- the date you purchased the asset
- when the asset was first used or installed ready for use
- the cost of each asset being less than the threshold.
From 1 July 2020 the instant asset write-off will only be available for small businesses with an aggregated turnover of less than $10 million and the threshold will be $1,000. Businesses with an aggregated turnover of $500 million or more are not eligible to use instant asset write-off.
Backing business investment – accelerated depreciation
Measures introduced in March 2020 provide an incentive to businesses with aggregated turnover of less than $500 million for the 2019–20 and 2020–21 income years, to deduct the cost of depreciating assets at an accelerated rate.
For each new asset, the accelerated depreciation deduction applies in the income year that the asset is first used or installed ready for use for a taxable purpose. You claim the deduction when lodging your tax return for the income year. The usual depreciating asset arrangements apply in the subsequent income years that the asset is held.
To be eligible to apply the accelerated rate of deduction, the depreciating asset must:
- be new and not previously held by another entity (other than as trading stock)
- be first held on or after 12 March 2020
- first used or first installed ready for use for a taxable purpose on or after 12 March 2020 until 30 June 2021
- not be an asset to which an entity has applied the instant asset write-off rules or depreciation deductions.
Eligible assets do not include:
- second-hand depreciating assets
- some specific Division 40 assets subject to low value and software development pools
- certain primary production assets
- buildings and other capital works for which you can deduct amounts under Division 43
- other specific capital asset and expense deductions
- assets you were committed to acquiring before 12 March 2020.
If accelerated depreciation is to be applied to the purchase of a passenger vehicle designed to carry a load of less than one tonne and fewer than nine passengers, the cost of the vehicle that can be claimed under depreciation rules is limited to the car limit at that time.
If accelerated depreciation is to be applied to the purchase of an asset used for Research & Development (R&D) purposes, you can only claim the R&D tax offset for the proportion of the decline in value that is for R&D use. In working out the amount in relation to R&D use, you must subtract any non-R&D use.
NOTE: If you use pooling for items over $150,000 it is a 57.5% deduction and for other businesses it is 50% of the cost plus the usual depreciation.