The instant asset write-off is a scheme that was introduced by the Australian Government in 2015, designed to enable businesses to claim the total anticipated depreciation of an asset at one time. While you may be aware of the program, the recent government changes might mean your business is eligible to claim more than was previously allowed.
During the COVID-19 pandemic, several changes were enacted to help Australian small businesses. Read on to find out what the write-off is, who’s eligible and how the new thresholds might affect your business.
What is the instant asset write-off?
The instant asset write-off allows small businesses in Australia with a yearly turnover under a certain amount, to claim immediate deductions for certain purchases.
What items can I write-off?
Purchases may include tools, supplies, equipment, cars and more. The items can be new or second-hand.
Which items are eligible for this financial year?
The write-off amount is dependent on the time the asset was purchased, in addition to certain thresholds.
What are the recent changes?
- The threshold has increased from $30,000 to $150,000 per asset
- Business eligibility has increased from $50 million to $500 million of aggregated turnover
These changes are for assets installed or used from 12 March, 2020, to 30 June, 2021, and purchased by 31 December 2020.
Source: Australian Taxation Office (ATO)
What about items I use for work and personal purposes?
When you make a purchase within the threshold limits, the business portion of the asset is eligible to be claimed in that financial year. If an item is used only partially for work purposes, only that portion of the item can be claimed, e.g. if you use your van for work purposes 60% of the time, 60% of its value is eligible for the write-off.
What about items that exceed the threshold?
If you purchase an item that meets or exceeds the threshold, it may instead be moved into the small business pool.
Does the threshold apply to the taxable or total cost of the asset?
The threshold applies to the total cost, not only the taxable amount.
How can I confirm eligibility?
You will need to determine:
- Your aggregated turnover
- The date your purchased the asset
- The date you first used or had the asset ready/installed for use
The cost of the asset
What about assets that are used in partnership businesses? Can they be claimed twice?
An instant asset write-off can only be applied once per item, so if your business is a partnership, you won’t be able to write-off an asset twice.
Example case study:
John owns a cleaning company with an annual turnover of $7 million.
In November of the 20/21 financial year, he purchased a van for $50,000, and second-hand cleaning equipment for $100,000. These items are used for work purposes 100% of the time, and never for personal reasons.
John also purchased a computer for $5,000, which he uses 50% of the time for work purposes, and 50% of the time for personal activities.
Based on these purchases, John should be able to claim an immediate deduction of $150,000 for his van and cleaning equipment, and $2,500 (50% of $5,000) for his computer when completing his 20/21 tax return.
Find out more:
Please note, the above is a guide only and may not reflect your personal circumstances. Speak to your accountant or contact the ATO for further details.
Australian Taxation Office