Important! Changes to the Instant Asset Write-off

By April 5, 2019Blog

Last month we published the changes made to the instant Asset Write-off legislation, well we may have spoken to soon….

Further to the proposed budget announcements last week, effective from 2nd April 2019 the government announced that it is increasing and expanding access to the instant asset write-off from 2nd April 2019 until 30 June 2020.

The changes are as follows:

  1. Increasing the instant asset write-off threshold from $25,000 to $30,000. The threshold applies on a per asset basis, so eligible businesses can instantly write-off multiple assets.
  2. Making the instant write-off available to medium sized business (the instant write-off is currently only available to eligible small businesses).

Small businesses (with an aggregated annual turnover of less than $10 million) will be able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use, from budget night until 30 June 2020. Only a few assets are not eligible (such as horticultural plants and in-house software).

TAX TIP – Claiming an instant asset write-off prior to Budget night

The government has already legislated a $20,000 instant asset write-off for small businesses, whereby they can immediately deduct purchases of eligible assets costing less than $20,000 that are first used or installed ready for use by 30 June 2019.

However, on 20 January 2019, the Government announced that it would increase the instant asset write off threshold from $20,000 to $25,000 and extend the write-off for an additional 12 months to 30 June 2020.

What does this mean for Small business?

This means that, when legislated, small businesses will be able to immediately deduct purchases of eligible assets costing less than $25,000 that are first used or installed ready for use over the period from 29 January 2019 until Budget night, 2nd April 2019.

As a result, assuming relevant legislation is enacted as proposed the instant asset write-off threshold applicable to small business taxpayers in the 2019 income year is as follows:

  • 1 July 2018 to 28 January: less than $20,000
  • 29 January 2019 before 7:30pm (AEDT) on 2nd April 2019: less than $25,000
  • From 7:30pm (AEDT) on 2nd April to 30 June 2019: less than $30,000

Small businesses can continue to place assets which cannot be immediately deducted under the instant asset write-off into the general small business poo and depreciate those assets at 15% in the first income year and 30% each income year thereafter. A low pool balance (i.e. the closing balance prior to the current year depreciation deductions) can also be immediately deducted if it is less than the applicable instant asset write-off threshold at the end of the income year.

The current “lock out” laws for simplified depreciation rules (these prevent small business from re-entering the simplified depreciation regime for five years if the opt out) will continue to be suspended until 30 June 2020.

What does this mean for Medium Business?

Medium sized businesses will also be able to immediately deduct purchased of eligible assets costings less than $30,000 that are first used, or installed ready for use, from Budget night (7:30pm (AEDT) 2nd April 2019) to 30 June 2020. A medium sized business for these purposes is one with an aggregated turnover of $10 million or more, but less than $50 million.

To be eligible, medium sized businesses must also acquire these assets after Budget night (7:30pm (AEDT) 2nd April 2019) to be eligible (as these businesses have previously not had access to the instant asset write-off).

As medium sized businesses do not have access to the small business pooling rules, they must instead continue to depreciate assets costing $30,000 or more (which cannot be immediately deducted) in accordance with the existing depreciating asset provisions of tax law.

If you are unsure about some of this information or need clarification on assets that qualify etc? Just give us a call, we can help and do help our existing client base navigate legislative changes.

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