Instant Asset Write-off
As part of the Federal Government’s economic stimulus package in response to the COVID-19 crisis, popular Instant Asset Write-Off rules have been expanded, with the threshold lifting to $150,000 from $30,000, and business annual turnover from $50 million to $500 million, until 30 June 2020. On 9 June 2020, the federal government announced it will extend the Instant Asset Write-off until 31 December 2020 . As part of the government’s 2020 Federal Budget, the cut-off date for first use, or install by, has been extended by a further 6 months, to 30 June 2021 .
In 2017-18 there were more than 360,000 businesses that benefited from the previous Instant Asset Write-Off, claiming deductions to the value of over $4 billion^.
The Instant Asset Write-Off is subject to various eligibility criteria and GST status.
In short, the Instant Asset Write-Off allows you to purchase a new asset for your business and write-off the entire purchase price in the same financial year.
Key criteria relating to Instant Asset Write-Off initiative:
- Asset can be new or used
- Asset to be purchased and installed between March 12 and
June 30 2020June 30 2021 – After which time the allowance reverts to a $1000 asset cost limit - Limit applies to individual asset (i.e 5 assets at $100,000 each still eligible)
Backing Business Investment (BBI)
In addition to the increase to the Instant Asset Write-Off, the government has announced a further time limited accelerated depreciation deduction for businesses with annual turnover up to $500 million.
Offering businesses a 15 month investment incentive to support their business, by accelerating depreciation deductions on new assets.
The BBI allows eligible businesses a deduction of 50 per cent of the cost of an asset on first use or installation, with existing depreciation applying to the balance of the asset’s cost.
Key criteria applying to the BBI initiative:
- Asset must be new and depreciable under Division 40 of the Income Tax Assessment Act 1997 (i.e. plant, equipment and specified intangible assets, such as patents) acquired after March 12 and before June 30 2021
More information and examples
https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Support_for_business_investment.pdf
Both benefits only apply to assets you have purchased, which precludes any assets acquired using traditional commercial finance solutions such as Rental or Finance Lease.
However, 3E’s Instalment Purchase Agreement will allow you to purchase that new asset, take advantage of the initiatives (provided you qualify as above) and still pay for your new asset via fixed payments over a pre-determined term.
Get the benefit of the use of the asset, tax deduction and GST claim for the asset today but pay for it in tomorrow’s dollars whilst it earns you income.
As always, please speak to your tax advisor to understand how these initiatives apply to your business.
Talk to one of our team now about taking advantage of the initiatives and our Instalment Purchase Agreement or fill out the form below and we will be in contact to discuss your requirements.
^ treasury.gov.au – Fact Sheet: Delivering support for business investment