Instant Asset Write-off Changes Given Royal Assent

Last week the Governments newly approved legislation, increasing the threshold for the instant asset write-off to $30,000, was given Royal Assent.

“The $25,000 instant asset write-off will improve cash flow by bringing forward tax deductions, providing a boost to small business activity and encouraging more small businesses to reinvest in their operations and replace or upgrade their assets,” announced Mr Morrison’s office.

The new instant asset write-off rules, using simplified depreciation rules, means that assets costing less than the threshold can be written off in the year they are first used, or installed ready-for-use. In order to take advantage of the new threshold, full cost of the asset must be less than the instant asset write-off threshold (e.g. less than $30,000), irrespective of any trade-in amount. Whether the threshold is GST exclusive or inclusive will depend on your GST status. The threshold also applies to every individual asset, irrespective of whether the asset was purchased new or second-hand.

The Instant Asset Write-off threshold has changed significantly since its introduction and most drastically during the current financial year, as evidenced in the table below.

Date range Threshold for Each Asset
7:30pm (AEDT) 02/04/2019 to 30/06/2020 You can immediately deduct the business portion of most depreciating assets costing less than $30,000 each
29/01/2019 to before 7.30pm (AEDT) 02/04/2019 You can immediately deduct the business portion of most depreciating assets costing less than $25,000 each
7.30pm (AEST) 12/05/2015 to 28/01/2019 You can immediately deduct the business portion of most depreciating assets costing less than $20,000 each
01/01/2014 to prior to 7.30pm (AEST) 12/05/2015 $1,000
01/07/2012 to 31/12/2013 $6,500
01/07/2011 to 30/06/2012 $1,000

Table 1: Instant Asset Write-Off Thresholds

How Much Can I Claim?

In working out how much of the instant asset write-off you can claim, you must subtract the private use proportion. The balance (the proportion used in earning your assessable income), is the taxable portion. It is important to note that whilst only the taxable portion is deductible, the entire cost of the asset cannot exceed the threshold.

Further, if you later sell or dispose of the asset for which you claimed an instant asset write-off, you include the taxable portion of the amount you received in the sale of the asset, in your assessable income.

Excluded Assets

The following assets are specifically excluded from the simplified depreciation rules and therefore the Instant Asset Write-Off however, you can use the general depreciation rules to claim a deduction for the following depreciating assets:

  • assets that are leased out, or expected to be leased out, for more than 50% of the time on a depreciating asset lease
  • assets you allocated to a low-value pool before using the simplified depreciation rules
  • horticultural plants including grapevines
  • software allocated to a software development pool (but not other software)
  • capital works

If you have any questions or need help understanding the new instant asset write-off thresholds for your business, feel free to contact Semmens & Co on 03 8320 0320 for a free consultation.

If you’re looking for more information on how to maximize tax benefits for your business, download our e-book Top 9 Tax Tips That Could Save You Thousands.

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Mark Semmens

Mark is a Chartered Accountant with a wealth of experience in accounting and taxation. Mark is a Member of Chartered Accountants Australia and New Zealand, the Tax Practitioners Board and the National Tax and Accountants Association.

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Daniela Semmens

Daniela Semmens is a Co-Director of Semmens & Co. and joined the company as General Manager in 2017. Daniela is an Affiliate Member of Chartered Accountants Australia and New Zealand and also a Member of the Australian Institute of Project Management.

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