small business instant asset write off information

The Small Business instant asset write off is still available

From one small business to another

Not many people know and can recite every tax reform ever introduced by the Federal Government; you wouldn’t want to know them if they could. So we were pleasantly reminded about the small business instant asset write off scheme, and would like to pass that information on to you. If you are the owner of a small business, or even work for one that you think may benefit, then read on.

Maybe there is a particular piece of machinery you have been eyeing off to boost your business efficiency. Or there was something you desperately needed to acquire but had been putting off. Like the peace of mind of having that diesel generator on hand to keep you ticking over in an emergency. We all want to make the most of any financial options provided to us. So take a minute to find out what you can do to write off a purchase from your tax return, and what your business needs to qualify.

So what are we talking about? Here are the specifics of the small business instant asset write off

Essentially the scheme is available to small businesses, whereby if you purchase an asset and it costs less than $25,000, you can then write off the business portion in your tax return for the relevant income year. This $25,000 threshold has been extended until 30 June 2019. The Federal Government has also proposed increasing this figure to $30,000 and running through until 30 June, 2020. Businesses will be able to claim the write-off every time an asset under the cap is purchased. 

This is all certainly good news for small businesses. To be eligible? Well you can use simplified depreciation rules and claim an immediate deduction for the business portion of each asset (new or second hand) costing less than $25,000 if:

  • you had a turnover of less than $10 million, and
  • the asset was first used or installed ready for use in the income year you are claiming in.

If the Government does increase the write-off figure to $30,000, so too will the eligibility criteria. Expanding from businesses with less than $10 million in annual revenue to those with less than $50 million in annual turnover. So it’s not only small businesses who can benefit, medium sized businesses can now also make significant advances to their needs. Remember, tax savings are great, but every $1 spent brings in only 27.5 cents in saved tax. So using the instant asset write-off to its full effect means looking at the bigger picture. And examining how you can make the tax break work for your business beyond simply pocketing the tax saved. 

There’s nothing to be gained by simply spending money for the sake of a tax break. You need to keep a sharp strategic eye on how you can use the tax break to lift your business to the next level. So that investment leads to higher profitability and productivity going forward. Surprisingly, not everyone is taking advantage of this initiative. According to ATO data, fewer than 350,000 businesses claimed something under the program in 2016-17, with an average claim amount of just $11,000. American Express survey data from last year indicated only 47% of SMEs haven’t even heard about it. 

Like to know more?

A fair bit to think over. Keep in mind that this is just general advice. By speaking to your tax advisor for further information you will be able to tailor a plan to your unique circumstances. More information can also be found on the ATO website.

So if you are going to retain one piece of tax reform in your mind, maybe just make it this one.