Massive increase to the instant asset write-off tax deduction scheme

TAX DEUCTION
Tax Deduction

You only have until June 30 to take advantage of the massive increase in the instant asset write-off scheme. That means if you want to get bigger business tax deductions this financial year, you need to buy any new business assets before June 30.

It’s important to understand that the instant asset write-off scheme has been massively enhanced for this financial year because the federal government wants to help minimise the impact of the coronavirus on the Australian economy.

What is the instant asset write-off scheme?

The instant asset write-off scheme allows you to  write off the entire cost of new business assets that you buy as a tax deduction. You can do this provided that:

1) the value of the asset is below a threshold value, and

2) your annual business turnover is below a threshold value.

What are the eligibility requirements for the instant asset write-off scheme?

Your business will be eligible for the instant asset write-off scheme if:

1) you buy any asset that is valued at less than $150,000 between now and the end of this financial year, and

2) your annual business turnover is less than $500 million.

The $150,000 threshold asset value applies to every asset that you buy, not to the combined value of the assets.  For example, let’s assume that you buy new factory machinery worth $120,000 and a new truck worth $100,000. You can immediately write-off the value of both assets because they each cost less than $150,000, even though their combined value is $220,000.

Assets bought prior to March 12 this financial year (in other words, assets bought pre-COVID-19) can only be claimed if they cost less than $30,000.

After June 30, the instant asset write-off scheme is currently scheduled to be wound back, with only assets up to the value of $1,000 able to be immediately written off as tax deductions. The annual business turnover threshold will also decrease to $10 million.

What business assets can I write off under the instant asset write-of scheme?

Examples include:

  • office equipment,
  • factory machinery, and
  • business vehicles (for example, cars or trucks).

What about buying business assets valued at more than $150,000?

The federal government has also announced accelerated tax deductions for depreciation for both the 2019/2020 and 2020/2021 financial years. This initiative is designed to help businesses who buy larger-value assets that can’t be written off under the instant asset write-off scheme.

If your business:

1)  has an annual turnover of less than $500 million, and

2) you buy any asset costing more than $150,000 between now and the end of the 2020/2021 financial year,

then you can immediately write off 50% of each asset’s cost as depreciation on your business tax return.

The remaining 50% of the cost can then be deducted at standard depreciation rates over the estimated useful life of the asset.

How we can help

At ARG Finance, our experienced team of finance brokers can help you with asset finance. We’ll take the time to understand your business so we can provide you with the right asset financing advice.

We’ll help you to compare different asset financing methods, such as:

  • secured business loans,
  • Unsecured business loans,
  • finance leases,
  • hire purchase and
  • chattel mortgages.

And best of all, our service is free to most of our clients because we are paid by lenders instead.

Contact us today for an obligation-free chat to find out how we can help your business!

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