Understanding the Instant Asset Write Off

By Peter Vickers Business Group | small business, Accounting, tax |

In the budget in April the Treasurer announced another change to this handy tax benefit. Just to show the voters how quickly they can act, Parliament managed to pass this legislation in two days so that they could get on with the election campaign.

The write off sounds simple but it is not.

In the 2018/19 year there are actually 3 different thresholds for the deduction:

To 28/01/2019

$20,000

29/01/2019 to before 7.30pm (AEDT) 02/04/2019

$25,000

7.30pm (AEDT) 02/04/2019 to 30/06/2020

$30,000


The next complexity is that the amount has to be below this number. So $29,999 is OK but not $30,000.

Then there is the question of whether it includes GST or not. This depends on your GST status. For most businesses this is excluding GST.

If only part of the asset is used for producing income then the entire asset must be less than the threshold but you can’t claim the private proportion.

The write off only applies to entities running a business. This can be a very arguable situation. There was a case where a taxpayer owned one goat and it was ruled that he was carrying on the business selling its semen. However since then the Taxation Office is being a lot more argumentative.

The threshold applies to each asset acquired. Many years ago when we had an investment allowance the ATO ruled that 6 chairs and a table were one asset and not 7 separate assets. The ATO has remained silent on this technicality. The asset write off applies to both new and second hand assets. The trade-in amount is disregarded. 

The deduction can only be claimed if the asset has been purchased and first used or installed ready for use by the above dates. “Installed ready for use” in many cases is difficult to determine.

The above deductions only apply to small businesses that are defined from 7.30pm (AEDT) 02/04/2019 as having an aggregated turnover of less than $50 million and before then as having an aggregated turnover of less than $10 million. If you are a tradesman then this is easy to work out but businesses with turnovers nearing $10 million tend to have started to have a number of “joint ventures” and complicated structures. This is even more so near the $50 million mark so working out aggregated turnover is a real issue.  

If you run a small business depreciation pool then if your opening balance is less than the above thresholds then you can write off the whole pool in that year.

For the Small Business Capital Gains Tax concessions the aggregated turnover threshold remains at $2 million.


Confused about company income tax rates? Learn how the revised income tax rates affect your business here.

If you’d like more information on how to grow your business, please contact one of our accounting and tax experts using the button below.

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