EOFY Guide: $20K Instant Asset Write Off

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The 2017 Federal Budget has one very useful inclusion for small business owners – the continuation of the $20,000 instant asset write-off for equipment expenses.

The scheme that was originally planned to run from 2015 to 2017 will be continued in the 2017-18 financial year.

What this means for you:

If you’re running a business with an annual turnover of less than $10 million, you can claim individual expenses of up to $20,000 worth of depreciating assets in each single instant write-off each financial year.

There are a few tricks to applying the instant asset-write off:

Second hand goods are ok – The instant asset write-off does not distinguish between new or second hand goods.  For example, second hand machinery may qualify if it meets the other requirements

Is the purchase relevant – You need to ensure that there is a relationship between the asset purchased by the business and how the business generates income. You can’t for example go and purchase multiple television sets if they have no relevance to your business.

Assets must be ready to use – If you use the $20,000 immediate deduction, you have to start using the asset in the financial year you purchased it (or have it installed ready for use). This prevents business operators from stockpiling purchases and claiming tax deductions for goods they have no intention of using in the short term.

Business and personal use – Where you use an asset for mixed business and personal use, the tax deduction can only be claimed on the business percentage.

The immediate deduction can be used more than once – Assuming all the other conditions are met, an immediate deduction should be available for each individual item costing less than $20,000.  Just be careful of cashflow.

What is not included:

There are a number of assets that don’t qualify for the instant asset write off as they have their own set of rules. These include horticultural plants, capital works (building construction costs etc.), assets leased to another party on a depreciating asset lease, etc.

 

For more information specific to your business please call our office on (03) 9338 8889 or by email info@firstpoint.expert

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