UPDATE: The Australian Tax office has announced that for assets you start to hold, and first use (or have installed ready for use) for a taxable purpose from 7.30 pm (AEDT) on 6 October 2020 to 30 June 2023, the instant asset write-off threshold does not apply. You can immediately deduct the business portion of the asset’s cost under temporary full expensing.
This means for Small Business with a turnover of less than $50 million; you can immediately deduct the business portion of that asset for both a new and 2nd hand asset you have purchased until June 2023 (extended in 2021 Budget). Note that there are rules around passenger vehicles which in the 20/21 financial year have a limit of $59,136 unless a commercial vehicle with a carrying capacity of more than 1 ton or more than 9 seats.
We do recommend you keep good records and more information an record keeping can be found here.
This is welcome news for SMEs who have, to quote Queen Elizabeth from her 1992 address, endured an ‘annus horribilis’; firstly with the catastrophic bushfires in January then debilitating COVID for the most part of the year.
Under the new Instant Asset Write-Off scheme, businesses can now claim an immediate deduction of up to $150,000 for the purchase of new or second hand goods. With this new arrangement, SMEs will pay less tax in 2019-20 helping business cash flow and withstand and recover from the economic impact of the Coronavirus.
For businesses with a turnover of under $10 million have access to a tax-free payment of up to $25,000 to help boost cash flow. The threshold applies on a per asset basis, so eligible businesses can immediately write‑off multiple assets.
One business that has witnessed the momentum of the stimulus first-hand is Pickles. As Australia’s leading marketplace for transport, construction, mining, aviation, vehicles, and salvage assets, Pickles has been inundated with enquiries and has been working with its SME vendors and buyers on how they can take advantage of the increased Instant Asset Write Off.
“Buying heavy equipment and machinery is a significant expense for any business, and with 2020 bringing more challenges than normal, the Government’s $150K Tax Break couldn’t have been a better reward for surviving the year,” says Pickles Director, Industrial, Bruce Connors.
Aside from the obvious advantage that buying used heavy equipment and machinery allows for a cheaper outlay, it also helps with resale value if and when a business does look to move on from its equipment.
Connors adds: “The increased Instant Asset Write Off has allowed our customers to set themselves up for a strong 2021 while giving them a much-needed cash injection now. We have seen a sales spike in earthmoving, haulage, forklifts, and general vehicles.”
Key benefits to SMEs
- The instant asset write-off has been supercharged – threshold increased to $150,000 for businesses with an annual turnover less than $500 million.
- Accelerated depreciation scheme to support business investment – deduct an additional 50 per cent of the asset cost in the year of purchase.
- A cashflow boost will be provided to small and medium-sized businesses.
To check your eligibility for the increased Instant Asset Write Off go to ato.gov.au.