Are you eligible for the Instant Asset Write-Off?

With the end of the financial year rapidly approaching, it’s time for small business owners to start thinking about what actions they can take now to prepare for the tax season.

And if you’re a small business with turnover of less than $10 million, you may be eligible for a significant tax deduction this year.

The ATO’s Instant Asset Write-Off rule means small businesses may be able to ‘instantly’ deduct assets purchased for business use, rather than depreciate them over time using the small business asset pool.

Historically, the Instant Asset Write-Off has been limited to assets of $1,000 or less, and to businesses with turnover of $2 million or less. However, in 2015 this was changed, to allow businesses with turnover of $10 million or less to instantly deduct assets up to $20,000. In June 2017, this was extended for another year.

And in the recently announced 2018-2019 federal budget, Treasurer Scott Morrison announced that the scheme will continue for another year, until June 30 2019.

With only a few months to take advantage of the scheme for this financial year, now’s the time for small businesses to find out more about. Here are 7 things you need to know about the Immediate Asset Deduction scheme.

1.       The asset must be purchased and installed to be considered eligible

While you may be tempted to leave purchasing new business assets until June 29th, by doing so you could be shooting yourself in the foot. In order to be eligible for the instant asset deduction, your asset (or assets) need to be purchased and installed before June 30th. You need to consider the possible lead time involved for any assets you’re considering acquiring.

2.       You can claim multiple assets, as long as each one is under $20,000

While there’s a cap of $20,000 per asset, there’s no cap on how many times a business can use this deduction. That means that you could potentially purchase any number of assets for your business before June 30th and instantly deduct them all, provided all other conditions are met.

3.       You can claim the immediate deduction regardless of whether or not you’re registered for GST

If your small business is registered for GST, you can claim the instant asset write off for assets of up to $20,000 excluding GST. If you’re not registered for GST, you can still claim the instant asset write-off – for assets up to $20,000 including GST.

4.       If you purchase an asset that’s used for both business and personal use, you can only claim the percentage that’s used for business

Some small business owners may purchase assets that are used for both business and personal use – such as a vehicle someone uses for work during the week, and to shuttle the kids around on weekends. If you intend to claim an asset you use for both business and personal use, you can only claim the business portion. For instance, if you purchase a vehicle for $15,000 that you use for business reasons half of the time, you can only claim 50%, or $7500, under the instant asset write-off.

5.       You can’t double-dip

If you choose to claim an asset using the instant asset write-off scheme, you can’t claim depreciation of the asset in the following tax years. The instant asset write-off is a one-off deduction, and you could end up penalised if you attempt to claim depreciation deductions on the same asset going forward.

6.       There are exemptions

Not all business assets are eligible to be claimed under the instant asset write. You’ll need to check the full list of exclusions with the ATO or your adviser.

7.       You need to obtain professional advice before you act Speak to your accountant, lawyer or other professional adviser before acting. Keep in mind, however, that any assets you intend to claim must be purchased and installed before June 30 this year – so it’s best to seek professional advice sooner rather than later.

If you’re interested in purchasing and installing Sensing+ for Agriculture prior to June 30, 2018 to take advantage of the instant asset write-off, please contact us at info@theyield.com. To download an info pack, click here.