Extension of Small Business Instant Asset Write-Off
The Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Bill 2018 was yesterday passed by the Parliament into law. The Bill extends by 12 months to 30 June 2019 the period during which Small Business Entities can access expanded accelerated depreciation rules for assets costing less than $20,000 (the threshold amount was due to revert to $1,000 on 1 July 2018).
Therefore, until 30 June 2019, Small Business Entities (with an aggregated turnover of less than $10 million ) can claim an immediate write-off for most depreciating assets for used in their business if the asset cost less than $20,000 and was installed ready for use in your business by 30 June 2019.
The real benefit from the $20,000 write-off is an improvement to your cash-flow. The write-off improves small business cash-flow by bringing forward deductions rather than having them spread out over more than one year. Cash-flow can be a significant issue for small business, particularly start-ups.
That said, it is important to have perspective. You are only getting back the tax rate on the asset, not the full value of the asset. This is the same as the old law where the write-off was $1,000 (which will apply from 1 July 2019). You don’t get any extra cash than you would otherwise have received under the old rules – you simply get it sooner. Consequently, you should not let tax distort or blur your commercial instincts – as you don’t get any extra cash than you would otherwise have under the old rules, you should continue to only buy assets that fit within your business plan.
Please contact McFillin & Partners if you would like further clarification or discuss the above in more detail.