$150k instant tax write-off ends soon

With the end of financial year fast approaching, small businesses have a once in a life-time opportunity to claim an instant tax write-off of up to $150,000. Introduced by the Federal Government as part of its COVID-19 relief measures, the instant write-off applies to depreciating assets first used or installed ready for use between 12 March 2020 and 30 June 2020 and with a cost of less than $150,000.  At this stage, from 1 July 2020 the instant asset write-off will likely drop back to the standard legislated amount of $1,000 per asset.

Who is eligible?

Businesses with an aggregated turnover of $500 million or less are able to use the instant asset write-off.  The purchase must occur between 12 March 2020 and 30 June 2020, with the asset also in use, or installed ready for use, between these dates.  The asset must cost less than $150,000.

What should I purchase?

Items you could consider purchasing include:

  • Cash registers and other point of sale devices
  • Cars, vans and utes
  • Fittings and fixtures for your premises
  • Plant and machinery for your trade
  • Computers, laptops and tablets
  • Security systems
  • Accounting software etc.
Considering the purchase of a vehicle?

Cars appear to be at the top of the list for those businesses already taking advantage of the instant asset write-off.  Whilst you may see this as a one-off opportunity to purchase the luxury car of your dreams,  the ATO has advised that vehicle limits will apply.  The instant write-off is limited to the business portion of the car limit of $57,581 for the 2019-20 income tax year.  The key elements here are ‘business portion’ and ‘limit of $57,581’.  So, if you purchase a car for $100,000, you’re only going to get a deduction of $57,581.  If you only use that car for 50% business use, you’re only going to get a deduction for 50% of the $57,581.  These rules apply to passenger vehicles designed to carry a load less than one tonne and fewer than nine passengers.

Talk to you Accountant or Tax Professional

Given there’s only four weeks remaining to take advantage of this measure, now would be a great time to get in contact with your accountant or tax professional.   You should work together to consider the cash flow of the business, as well as assessing the benefit of potential asset purchases to the business.  Consider whether you have ample cash reserves available, or will you have to take out a business loan?  Or should you be conservative and save you cash? How much tax will you actually save?

Further Information:

For further information relating to the $150,000 instant asset write-off as part of the Economic Response to COVID-19 (Coronavirus) Federal Government Stimulus Package, visit Depreciation and Capital Expenses.

Disclaimer:  Paragon Business Services does not provide financial or tax advice.  All information provided is of a general nature only and might no longer be up to date or correct.  You should seek professional accredited tax and financial advice when considering whether the information is suitable to your circumstances.