With less than three months until the end of the financial year there’s still time to take advantage of the $20,000 instant asset write-off.
Introduced in the 2015 federal budget, the policy was designed to encourage small businesses to spend more on equipment by giving them the ability to claim depreciation on the full value of income-producing assets purchased to the value of $20,000, instead of claiming the deductions over a number of years. Prior to the introduction of this policy, the instant asset write-off threshold for small businesses was just $1000.
The scheme was originally available to businesses turning over up to $2 million annually, however, eligibility for the scheme was later extended to businesses turning over up to $10 million after the government’s definition of a small business was changed.
The policy was warmly welcomed by smaller operators, and the SME community successfully lobbied for an extension of the policy, which meant it would stay in place until June 30, 2018 – 12 months longer than its original expiration date of June 30, 2017. The push in now on to make the $20,000 instant asset write-off scheme a permanent fixture in the May budget.
According to Treasury data, in the first 12 months of the scheme, 99,000 businesses took advantage of the write-offs, claiming a total of $415 million, up from the $165 million claimed in write-downs before the scheme was introduced.
So how exactly does it work, are you eligible, and is it really that beneficial for your business?
$20,000 Instant Asset Write-Off Scheme Explained
Who Can Get It?
Any small business or sole trader with an Australian Business Number [ABN] is eligible for the tax deduction as long as their business has an annual turnover of less than $10 million.
How Does It Work?
Businesses or sole traders purchase the items outright and then get the money for the item back as a tax write-off.
What Can I Purchase?
Any item that relates to your business – this could include such items as; televisions, new cars, fridges, printers, computers, tablets, smartphones, coffee machines, solar panels, air-conditioning, power tools etc.
The items don’t have to be brand new and can also be second hand. The government says most small capital purchases will be eligible for the new threshold. This means any item valued under $20,000 used for running your business is now 100% tax deductible.
What Can’t I Claim?
Items to be claimed must be physical items. Marketing costs are not permitted. You also aren’t able to claim stock or claim for assets that have specific depreciation rules like software for your business.
Can I Only Claim $20,000?
No, you can claim as many products under $20,000 as you desire. There is no limit.
Assets above the $20,000 threshold can be added together in the existing simplified depreciation pool and depreciated at the same rate: 15% in the first income year and 30% thereafter. If the value of the asset “pool” is less than $20,000, it can be immediately deducted until the end of June 2018
Are There Any Rules Around My Claim?
Yes, the items that you purchase must be related to your business.
If I Want To Buy Something Over $20,000 Can I Still Claim Any Deductions?
Yes. Any items over $20,000 can be added together [pooled] and depreciated at the same rate. These assets are depreciated at 15 per cent in the first income year and 30 per cent per year thereafter.
How Long Do I Have To Claim?
The $20,000 instant asset write-off scheme currently expires on June 30, 2018. It is scheduled to go back to the original $1,000 threshold after that time unless it is extended.
Get in before the EOFY and pay less tax!
We can help you finance the purchase of your $20,000 asset prior to June 30, 2018!
We have access to a broad range of motor vehicle and plant & equipment finance products at the very best rates, including; chattel mortgages, novated leases, finance leases and fit out finance. For more details please visit our specialist asset finance website xpresscarloans.com.au or call us on 08 8451 1500.
Alternatively, we also have access to a range of unsecured business lenders to help you fund your purchase. You can apply online for small business loans of $20K or more in under ten minutes, with fast approvals and loan funding usually within 24 hours. For more details please visit xpressbusinessloans.com.au or call us on 08 8451 1500.
For more info please don’t hesitate to contact us on 08 8451 1500
Sam, Matt & Andy
Adelaide Finance Brokers + a lot more…
PS. We’ve created a property investment coaching program to help guide you through the process of building a cash flow positive property portfolio – for more info click here