Instant Tax Write-Off: What is it and How Can it Help SMEs?

If you’re a small business owner and haven’t heard of the instant asset tax write-off, you need to! You can benefit from it when you purchase a car or equipment for your business.

What is the Instant Asset Tax Write-Off?

It is a government initiative that allows small businesses to get an immediate tax deduction on asset purchases.

Eligible asset purchases include new and second-hand tangible machinery, plant and equipment, including trucks and utility vehicles. It also covers intangible investments, like e-commerce software, patents and copyrights. These assets must be used or installed ready-for-use in the current financial year (or until June 30th).

Updates for 2019

The instant asset write-off was originally intended for small businesses with an annual turnover of less than $10 million. Recently, however, the government has expanded its eligibility to medium-sized businesses with a turnover cap of $50 million.

Several other changes in the program were announced, including:

1. Increased in the deductible amount from $20,000 to $30,000 per asset
2. Variation in the threshold amount that can be claimed over the space of the financial year:
   

• $20,000 for depreciable assets acquired before 29 January 2019

• $25,000 for assets acquired between 29 January 2019 and 2 April 2019

• $30,000 for assets acquired between 2 April and before 1 July 2020

Big Win for SMEs

The new instant asset tax write-off can benefit more businesses than it had before with around 3.4 million SMEs now eligible for the program.

According to Treasurer Josh Frydenberg, it would provide improved cash flow for SMEs and boosts spending and investment by operators. This, according to him, would allow “a cafe to get a new fridge or grill, a plumber to buy new tools or a courier a new van.”

Claiming the Instant Asset Write-Off

You can claim the instant asset deduction for all assets that come under the threshold when you file your tax return for this financial year.

Partnerships

Business partnerships are prohibited from double-dipping. Individual partners do not own asset purchases under a partnership. If your partner buys an asset in his or her own name, it won’t be eligible for the tax deduction. If a business partner is not qualified as a small business taxpayer, he or she will not be eligible for the write-off, too.

The $30,000 instant asset write-off has been in effect since April 2, 2019. It will remain in place until June 30, 2020. However, its fate will depend on the current government’s victory in the upcoming Australian federal election.

If you need to buy new assets for your business but don’t have enough money, get a Business Loan at Positive Lending Solutions. Call 1300 722 210 or fill out the Quick Quote form. One of our loan specialists will get back to you to discuss your business financing options.