As part of the Australian government’s coronavirus stimulus package, treasurer Josh Frydenberg has announced an extension and increase of the instant asset write-off scheme. Nearly every Australian business is now able to write-off the cost of assets up to a value of $150,000.
During his budget speech, Frydenberg called the measures “the largest set of investment incentives ever offered.” With 80% of jobs in the private sector, the small business instant asset write-off gives the “engine of the Australian economy” a boost during the COVID-19 crisis recovery.
What Is the Instant Asset Write-Off?
The instant asset write-off is a temporary tax incentive available to all Australian businesses with an annual turnover of less than $5 billion.
Business owners can claim an immediate tax deduction of the full value of all eligible assets that are installed or in use before the deadline of June 30, 2022.
The scheme also covers the cost of improvements made to existing depreciable assets.
“It will unlock investment, expand the productive capacity of the nation, and create tens of thousands of jobs.” – Treasurer of Australia, Josh Frydenberg
For businesses that have already purchased eligible assets, a 6-month extension has been provided for the company to use or finish the installation of those assets. The new deadline for these businesses is June 30, 2021.
Which Businesses Can Claim the Instant Asset Write-Off?
The investment incentive scheme is available to 99% of Australian businesses. Every business with an annual turnover of less than $5 billion can use the scheme to write-off eligible assets. New assets and improvements to existing depreciable assets qualify for full expensing.
For small and medium-size businesses with an annual turnover of less than $50 million, the instant asset write-off also covers the purchase of second-hand assets.
In a statement released alongside the budget announcement, Treasurer Josh Fydenberg stated: “A trucking company will be able to upgrade its fleet, a farmer will be able to purchase a new harvester, and a food manufacturing business will be able to expand its production line.”
When Does the Scheme Start?
The investment incentive has the support of Labor and is expected to be passed imminently. All eligible assets purchased after October 6, 2020, will qualify for full expensing.
When Will the Scheme End?
Businesses can claim assets under the scheme as long as they are installed or in use by June 30, 2022, deadline.
For businesses that have already purchased eligible assets, the deadline for the assets to be installed or in use is June 30, 2021.
Which Assets Are Eligible for Instant Asset Write-Off?
The scheme covers all assets that qualify under the existing depreciable asset criteria. Examples cited by the government include forklifts, coffee machines, tractors, labellers, and freezers.
The total cost of a purchased asset must be less than $150,000 to be eligible. This sum also includes the personal use share of the asset.
For more information on the criteria for depreciating assets, you can download the Guide to Depreciating Assets 2020 from the Australian Taxation Office website.
Are Any Types of Asset Excluded?
There are several types of asset that are excluded from the instant asset write-off scheme.
Excluded assets categories include capital works and intangible assets (customer lists, goodwill, and trademarks). Assets that qualify for separate tax treatments are also excluded, such as software allocated to software development pools and horticultural plants.
You can find out more information about excluded assets on the Australian Taxation Office website.
Can I Write-Off a Second-Hand Asset?
Businesses with an annual turnover of less than $50 million qualify for an instant asset write-off of up to $150,000 for second-hand assets. These assets must be purchased after October 6, 2020, and in use or installed by June 30, 2022.
For businesses with an annual turnover between $50 million and $500 million, the scheme covers eligible second-hand assets that are purchased before December 31, 2020, and in use or installed by June 30, 2021.
How to Take Advantage of the Instant Asset Write-Off
The instant asset write-off provides an excellent opportunity for business owners looking to invest in new equipment and assets to grow their business.
As long as the purchase of each asset is less than $150,000, there is no limit on the amount that can be claimed using the instant asset write-off scheme.
If you are considering expanding your business or upgrading your equipment, the scheme offers a compelling incentive to act now.
ScotPac Asset Finance
The instant tax write-off scheme can help you to lower your tax payments and invest in your business. But before any significant business purchase, it’s important to consider how your cash flow will be affected. Any large expense can restrict working capital and result in a cash flow gap that stunts business growth.
We offer a range of flexible Asset Finance solutions to help you to take advantage of the government investment incentive. You can access the capital you need to purchase the equipment, machinery, and vehicles you need to take on new opportunities and grow your business.