Earlier this week the Government announced an increase to the Small Business Instant Asset Write-off threshold from $20,000 to $25,000 effective 29 January 2019, and an extension to the availability of the write-off to 30 June 2020. This extends both the threshold for 17 months and the availability of the measure by 12 months from its original end date of 30 June 2019. The Government will seek to legislate the increase as soon as Parliament returns in two weeks.
The write-off is available to Small Business Entities (those carrying on a business with a turnover of less than $10 million per year, including the turnover of connected and affiliated entities). All depreciable assets (including second-hand assets) used in a business are eligible for the write-off including motor vehicles, furniture, computer equipment, machinery etc. The following assets are, however, specifically excluded from the write-off as they have their own unique depreciation treatment:
- Horticultural plants
- Buildings (these are dealt with under the Capital Works provisions)
- Assets allocated to a low-value pool or software development pool
- Primary production assets for which an entity has chosen to use the Uniform Capital Allowance (UCA) depreciation rules rather than the small business depreciation rules.
Financed assets are also eligible. Assets that are the subject of a commercial loan, chattel mortgage or hire purchase would all qualify. Assets that are the subject of a lease however do not qualify for the write-off because the ownership of the asset under a lease remains with the finance company.
Although in utilising the write-off you are improving tax position in 2018/2019 or in 2019/2020, 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 under the old $1, 000 threshold. You do not get any extra cash than you would otherwise have received under the old rules. However, you do get it sooner. Consequently, you should not let tax distort or blur your commercial instincts – as you do not 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.
To get the tax benefit of this measure in the current financial year, you will need to have the asset purchased and installed ready for use in your business by 30 June 2019.
If you have any questions in relation to the above and whether you are eligible, please contact us today on 07 3263 7030 or firstname.lastname@example.org