On 9 June 2020, the government announced it will extend the $150,000 instant asset write-off until 31 December 2020.
Please refer to the attached ATO guidelines and below.
Under instant asset write-off eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used, or installed ready for use.
Instant asset write-off can be used for:
- multiple assets as long as the cost of each individual asset is less than the relevant threshold
- new and second-hand assets.
It cannot be used for assets that are excluded from the simplified depreciation rules.
The instant asset write-off eligibility criteria and threshold have changed over time. You need to check your business’s eligibility and apply the correct threshold amount depending on when the asset was purchased, first used or installed ready for use.
Changes from 12 March 2020
From 12 March 2020 until 30 June 2020 the instant asset write-off:
- threshold amount for each asset is $150,000 (up from $30,000)
- eligibility has been expanded to cover businesses with an aggregated turnover of less than $500 million (up from $50 million).
Eligibility to use instant asset write-off on an asset depends on:
- your aggregated turnover (the total ordinary income of your business and that of any associated businesses)
- the date you purchased the asset
- when it was first used or installed ready for use
- the cost of the asset being less than the threshold.
If you run a small business and choose to use the simplified depreciation rules, you must use instant asset write-off on all eligible assets.
Businesses with an aggregated turnover of $500 million or more are not eligible to use instant asset write-off.
From 1 July 2020 the instant asset write-off will only be available for small businesses with an aggregated turnover of less than $10 million and the threshold will be $1,000.
Exclusions and limits
There are a small number of assets that are excluded.
In addition, if you purchase a car (a passenger vehicle, except a motor cycle or similar vehicle, designed to carry a load less than one tonne and fewer than nine passengers) for your business, the instant asset write-off is limited to the business portion of the car limit of $57,581 for the 2019–20 income tax year. For example, if you use your vehicle for 75% business use, the total you can claim under the instant asset write-off is 75% of $57,581, which equals $43,186.
You cannot claim the excess cost of the car under any other depreciation rules. For a worked example, refer to example 1 in the attachment.
Cost of asset exceeds threshold
If you are a small business using the simplified depreciation rules, and the cost of the asset is the same as or more than the relevant instant asset write-off threshold, the asset must be placed into the small business pool.
If you are not using the simplified depreciation rules, and the cost of the asset is the same as or more than the relevant instant asset write-off threshold, you may be able to use the Backing business investment – accelerated depreciation for certain qualifying assets or use the general depreciation rules.
Work out your deduction
The entire cost of the asset must be less than the relevant threshold, not including any trade-in amount. Whether the threshold is GST exclusive or inclusive depends on if you’re registered for GST.
To work out the amount you can claim, you must subtract any private use portion. The balance (that is the portion you use to earn assessable income) is generally the taxable purpose portion (business purpose portion). While you can only claim the taxable purpose portion as a deduction, the entire cost of the asset must be less than the relevant threshold.
This also applies to research & development (R&D) use. When you work out the amount you can include in the calculation of your R&D tax offset for your R&D use you must subtract any non-R&D use including the taxable purpose portion and private use portion.
Later sale or disposal of asset
If you use the instant asset write-off for an asset and then sell or dispose of that asset, you need to include the taxable purpose portion of the amount you received for the asset in your assessable income for that year.
If you use the instant asset write-off for an asset that is later destroyed (for example, in a bushfire or flood) then the amount you receive (such as from an insurance payout) for the destruction of the asset is included in your assessable income.