Extension of the $150,000 Instant Asset Write-Off Provisions

The Treasurer has announced a six month extension to maintain the current instant asset write-off availability and $150,000 threshold until 31 December 2020. This is not yet law – it is still to be passed by parliament. We will update our clients when it has been passed into law.

Below are four things to be aware of in relation to instant asset write-off provisions:

    1: Eligibility and the available threshold is determined by the business turnover level and when the asset is purchased and installed ready for use
    An instant asset write-off on assets with a cost base of:

      1. Up to $150,000 is available to businesses with an aggregated turnover of less than $500 million, providing that the asset is first used or installed ready for use between 12 March 2020 and 30 June 2020 (to be extended to 31 December 2020).
      2. Up to $30,000 is available to businesses with an aggregated turnover of less than $50 million, providing that the asset is first used or installed ready for use between 7:30 pm AEDT on 2 April 2019 to 11 March 2020.

    2: It is normally only applicable to assets purchased through the main trading entity
    It is common for businesses to be structured with an asset holding entity and a trading entity. The asset holding entity leases their assets for use by the trading entity. This is generally done with view to asset protection in the event of litigation.

    If this applies to your situation and you are interested in the instant asset write-off provisions, please discuss with your accountant before entering purchase arrangements.

    3: Some asset types are excluded
    The instant asset write-off does not apply to capital works deductions, for example building constructions and improvements.

    4: Passenger vehicles are subject to a car cost limit for depreciation purposes
    A specific cost limit of $57,581 (for the 2019-20 income tax year) applies to purchases of passenger vehicles that have been designed to carry a load of less than one tonne and less than nine passengers. What this means is if you spent say $80,000 on a car for your business in June 2020, you can only claim $57,581 as an instant tax write-off in the 2019-20 income tax year. The remaining $22,419 cannot be depreciated under any other rules as it is above the cost limit.

    This is despite the fact that the instant tax write-off threshold applicable at that time is for assets of up to $150,000.

    The cost limit will increase to $59,136 for the 2020-21 income tax year.

The benefit of being able to access an instant tax write-off is that the tax deduction in relation to a qualifying asset purchase is made in full against the year of purchase, rather than being limited to being claimed progressively over the effective life of the asset. As an example – a eligible company purchases a qualifying asset at $20,000. The impact on the taxable income in the year of purchase is an approximate tax saving in that year of $5,500, rather than this being spread of the effective life of the asset.

If you are considering purchasing assets and claiming the costs under the instant asset write-off scheme, please contact us on 03 5339 3200 or contact us here, so we can confirm whether the intended purchase would qualify or not.

Thanks for reading.

The information contained on this website has been provided as general advice only. The contents have been prepared without taking account of your personal objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.

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