Small business gets a shot in the arm with extension of $20,000 asset write-off
Ø Date of effect: extended until 30 June 2018
The $20,000* immediate deduction threshold for assets purchased by businesses with an aggregated turnover of under $10 million will be extended until 30 June 2018. Assets will need to be used or installed ready for use by 30 June 2018 to qualify for the higher threshold.
Assets costing $20,000 or more can be allocated to a pool and depreciated at a rate of 15% in the first year and 30% for each year thereafter. If the closing balance of the pool, adjusted for current year depreciation deductions (i.e. these are added back), is less than $20,000 at 30 June 2018 then the remaining pool balance can be written off as well.
Instant asset write-off only applies to certain depreciable assets.
There are some assets, like horticultural plants, capital works (building construction costs, etc), assets leased to another party on a depreciating asset lease, etc, that don’t qualify.
The current ‘lock out’ laws for the simplified depreciation rules (these prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out) will continue to be suspended until 30 June 2018.
Taxpayers asked and the government listened!
From 1 July 2018, the immediate deductibility threshold will revert back to $1,000. There are a few issues to be aware of if you want to utilise the instant asset write-off which you can investigate by calling Carrick Aland on 07 4669 9800.
The instant asset write off is a tax deduction that reduces the amount of tax your business has to pay. It enables your business to claim a deduction for depreciating assets in the year the asset was purchased and used (or installed ready to use). For example, if your business is in a company structure the most you will ‘get back’ is 27.5% (in 2016-17). If your business is likely to make a tax loss for the year then the bigger deduction might not provide any short-term benefit to you.
* $20,000 exclusive of GST for GST registered businesses. $20,000 inclusive of GST for businesses not registered for GST.