As part of the Federal Government’s COVID-19 relief package, they increased the instant asset write-off threshold to $150,000 and expanded its application to businesses with a turnover of up to $500 million.
When considering asset acquisitions prior to year end, this means that your business may be able to obtain an immediate tax deduction for the purchase of an asset up to the following deduction thresholds:
- From 1 July 2019 to 11 March 2020: $30,000
- From 12 March to 30 June 2020: $150,000
Both of these thresholds are available to businesses with a turnover of $50 million or less (with the $150,000 threshold available to businesses with a turnover up to $500 million).
On 6 June 2020, the Government announced that the $150,000 threshold will be extended to 31 December 2020. However, this extension has not yet been legislated.
The deduction applies on a per asset basis. This means you claim an immediate deduction for multiple assets provided each costs less than $150,000. For example, if your business acquired 3 forklifts for $100,000 each between 12 March 2020 and 30 June 2020, you can claim a deduction for each of these forklists in the 2020 financial year (a total deduction of $300,000).
The assets can be new or second hand. However, they must be installed and ready for use when you are claiming the deduction (ie. before 30 June 2020 if you would like to claim the deduction in the 2020 financial year).
The deduction available for motor vehicles is capped at the car limit ($57,581 in the 2019/20 financial year). This is the maximum amount that can be claimed as a deduction for the purchase of a car, regardless of how much it actually cost the business.
In addition to this, if the vehicle is only used proportionally for business purposes, you can only claim the business proportion of the car limit. For example, if you only used the car for 75% business use, the total you can claim under the instant asset write-off is 75% of $57,581, which is $43,186.
Assets acquired for more than the threshold
If your business acquired an asset for more than the instant asset write-off threshold, the asset will be placed into a small business pool. Under the simplified depreciation rules, the asset will be depreciated at 15% in the first year and then 30% in subsequent years.
New threshold from 1 July 2020 (or potentially 1 January 2021)
Once the $150,000 instant asset write-off finishes (which is currently 30 June 2020, or 31 December 2020 after the relevant legislation is passed), the instant asset write-off threshold will reduce to $1,000 and will only be available to businesses with a turnover of less than $10 million.
DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.