EOFY 2020: Tax Tips – Instant Asset Write-off

As the end of the financial year (EOFY 2019-20) comes to a close, it is an appropriate time to review your IT and business alignment from these past twelve months and reflect on the success obtained to determine objectives for the forth coming year. 

Have you heard of the Federal Government’s instant asset write-off?

If you haven’t, you’re not alone. Research by American Express has revealed almost half of all small business owners are unaware of this initiative and that it could be of great help. 

Here’s a quick rundown on the instant asset write-off and whether it’s something you should take advantage of.

What is an instant asset write-off?

An instant asset write-off allows small businesses (with an annual turnover of less than $500 million, up from $50 million) to claim immediate deductions (up to an amount of $150,000, up from $30,000) for new equipment, such as physical IT hardware and infrastructure. The assets must first be used, or installed for use, in the income year you’re claiming for. 

The amount you can write-off will depend on when the asset was purchased and the associated threshold amount. 

Do note from July 1 2020, the instant asset write-off will only be available for small business with a turnover of less than $10 million, and the threshold will be $1000.

What type of purchases should I consider making?

If you decide to take advantage of the instant asset write-off, you should make the decision based on the needs of your business. For example, if you need to purchase new IT infrastructure your business operations to help productivity, improve security compliance, or achieve your business goals because it is in line with your business plan.

What if I make a purchase that is greater than the write-off amount?

The instant asset write-off threshold applies to the total cost of the asset, not just its taxable portion. Any purchases equal to or more than the threshold can be put into your small business asset pool, where you will be able to claim gradual deductions (depreciation) each year.

How do I claim the instant asset write-off?

If you buy an asset that comes under the threshold, you can claim the business portion of the asset’s use in your tax return for that financial year. 

You can claim a deduction for multiple assets as long as the cost of each individual asset is less than the relevant threshold. 

The ATO website provides examples of how to work out your instant asset write-off. For more information on the instant asset write off visit the Australian Taxation Office website or speak to your accountant or a qualified tax professional.

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