We’ve got some great news about claiming the cost of your business assets.
With the end of the financial year rapidly approaching, it’s time for small business owners to start thinking about what actions they can take NOW to make the most of the instant asset write-off and prepare for the tax season.
Historically, the Instant Asset Write-Off has been limited to assets of $1,000 or less, and to businesses with a turnover of $2 million or less. However, in 2015 this was changed, to allow businesses with a turnover of $10 million or less to instantly deduct assets up to $20,000.
The ATO’s extended Instant Asset Write-Off, now increased the instant asset write-off threshold from $20,000 to $25,000 and extend the initiative to 30 June 2020, this ruling means small businesses may be able to ‘instantly’ deduct assets purchased for business use, rather than depreciate them over time using the small business asset pool.
It is expected to enable more than three million small businesses across the country with an annual turnover of less than $10 million to access the new $25,000 instant asset write off now.
Prime Minister Scott Morrison stated “The scheme allows small businesses to immediately deduct assets costing less than $25,000 instead of claiming deductions over a number of years and there is no limit on how many assets can be claimed. The small business sector represents 99% of all businesses in Australia, so this measure will give small businesses more opportunities to grow and thrive.”
With only a few months to take advantage of the scheme for this financial year, now’s the time for small businesses to find out more about it here.
Let’s look at 5 things you need to know about extended Instant Asset Write-Off:
1. The asset must be purchased and installed to be considered eligible
While you may be tempted to leave purchasing new business assets until June but that could work against you. You need to account for the possible lead time involved for any assets you’re considering acquiring. To be eligible for the instant asset deduction, your asset (or assets) need to be purchased and installed before June 30th, 2019 to be able to claim for this EOFY.
2. You can claim multiple assets if each one is under $25,000 There’s no cap on how many times a business can use this deduction. There is a cap of $25,000 per asset which means that you could potentially purchase any number of assets for your business before June 30th and instantly deduct them all, but do check that all other conditions are met before going ahead. Small business owners may purchase assets that are used for both business and personal use. You can claim an asset you use for both business and personal use, but you can only claim the business portion. An example would be if you purchase a vehicle for $15,000 that you use for business reasons half of the time, you can only claim 50%, or $7500, under the instant asset write-off.
3. Claim the immediate deduction regardless of whether you’re registered for GST If your small business is registered for GST, you can claim the instant asset write off for assets of up to $25,000 excluding GST. If you’re not registered for GST, you can still claim the instant asset write-off – for assets up to $25,000 including GST.
4. What are the exemptions? Not all business assets are eligible to be claimed under the instant asset write-off. You’ll need to check the full list of exclusions with the ATO, your adviser or me.
If you choose to claim an asset using the instant asset write-off scheme, you can’t claim depreciation of the asset in the following tax years. The instant asset write-off is a one-off deduction, and you could end up penalised if you attempt to claim depreciation deductions on the same asset going forward. (A depreciating asset declines in value over time, such as: Computers, electrical tools and vehicles)
5. Obtain professional advice before you act
You need to obtain professional advice relating to your personal circumstances before you act, speak to your accountant or professional adviser before acting. Keep in mind, however, that any assets you intend to claim must be purchased and installed before June 30 this year – so it’s best to seek professional advice sooner rather than later.
If you’re interested in taking advantage of the instant asset write-off, but you are not sure if you are eligible or you need advice before you purchase please contact us today, either click here to fill out our contact form or call me on 0418 334 847.