Getting financial advice is important no matter what decisions you make involving your money and assets. The more you know, the more informed your choices will be. Often, there are a lot of great resources and potential financial claims you can make to help your business. One of the things your business might be eligible for is an instant asset write-off. But what is this? And is this right for you? Let’s take a further look.
What is an instant asset write-off?
Unlike a normal depreciation expense whereby you write-off the depreciation expense over a set period, the instant asset write-off allows you to claim the full deduction for the business portion of each asset either purchased in that financial year or when it is installed and ready for use.
The instant asset write-off can be used for multiple assets if the cost of each asset is less than the relevant threshold, as well as new and second-hand assets.
If you’re using your car as an instant asset write-off, note that it is limited to the business part of the car limit for the relevant income tax year. The amount you use your car for your business is the percentage used to calculate how much you can claim.
Are you eligible for an instant asset write-off?
Not everyone is eligible for an instant asset write-off. It depends on the date you purchased the asset, when it was first used or installed for use, your aggregated turnover (you are not eligible if your aggregated turnover is $500 million or more), and if the cost of the asset is less than the threshold.
The current instant asset write-off thresholds for small businesses that apply the simplified depreciation rules:
- Less than $10 million aggregated turnover | 12 March 2020 to 30 June 2021, providing the asset was purchased on or after 7:30pm (AEST) on 12 May 2015 and by 31 December 2020 | $150,000
- Less than $10 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 prior to 7:30pm (AEDT) on 2 April 2019 | $25,000
- Less than $10 million aggregated turnover | 1 July 2016 to 28 January 2019 | $20,000
The current instant asset write-off thresholds for small businesses with an aggregated turnover of between $10 million and $500 million:
- Less than $500 million aggregated turnover | 12 March 2020 to 30 June 2021 providing the asset was purchased on or after 7:30pm (AEST) on 2 April 2019 and by 31 December 2020 | $150,000
- Less than $50 million aggregated turnover | 7:30pm (AEDT) on 2 April 2019 to 11 March 2020 | $30,000
If the cost of the asset you purchase exceeds any of the above-mentioned thresholds you will not be eligible for the instant asset write-off and instead will have to depreciate it over the useful life expectancy.
If you’re still unsure exactly how this works or how it will impact your tax return at the end of the financial year, be sure to get in touch with your Accountant. Also, head over to the ATO website for a more detailed look at what an instant asset write-off might mean to you.
Disclaimer statement: This page or article provides general information only and has been prepared without considering your objectives, financial situation, or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice about your individual circumstances.
