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Instant asset write-off expansion

The government announced plans for a six-month extension—to 31 December 2020—of the “instant” asset write-off provided as a relief for businesses in response to the coronavirus (COVID-19) pandemic.

Businesses will be able to access the boosted $150,000 instant asset write-off scheme for a further six months to the end of the year. As part of its emergency COVID-19 fiscal package, the government quin­tupled (from $30,000) the value of assets businesses were able to instantly write -off for the ­period of March 12 to June 30 and expanded the eligibility to cover businesses with a turnover of less than $500m (up from $50m ­previously).

The extension will also give businesses additional time to acquire and install assets, as they will now have until the end of the year. Assets can be new or second hand and could include for example a truck for a delivery business or a tractor for a farming business.

This initiative is bringing forward the tax deduction that would have been deductible over several years.

A higher instant asset write-off should be a permanent feature of our tax system going forward.

The reversion to $1,000 would have had a negative impact on the broader economy as the incentive for small businesses to reinvest in their future would be taken away, restricting potential growth, employment, and prosperity.

Businesses can claim an immediate deduction for multiple assets, new or second hand, provided each asset costs less than $150,000. Assets must be first used or installed ready for use between 12 March 2020 and 31 December 2020 to claim the expanded threshold.

According to the ATO, the following tips can help you get your instant asset write-off claim right:

  • check if you're an eligible business

  • both new and second-hand assets can be claimed, provided each asset costs less than $150,000

  • assets must be first used or installed ready for use between 12 March and 31 December 2020

  • a car limit applies to passenger vehicles. The limit is $59,136 for the 2020-21 income tax year

  • if your asset is for business and private use, you can only claim the business portion

  • different eligibility criteria and thresholds apply to assets first used, or installed ready for use, prior to 12 March 2020.

Some exclusions and limits apply, for example, a car limit of $57,581 applies to passenger vehicles (except motorcycles or similar vehicles) designed to carry less than one tonne and fewer than nine passengers.

Small businesses can also claim a deduction for the balance of their small business pool if it is less than $150,000 at the end of the 2020-21 financial year.

If you do not use the simplified depreciation rules, you may be eligible to deduct an amount using accelerated depreciation if the asset is an eligible asset.

If you would like to find out more or are looking for a new accountant, please contact us at The Tax Accountant and we will be able to help you.⠀

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