How the government’s instant asset write-off has changed, who’s eligible and what can be claimed

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This year, the Australian government announced significant measures in an effort to help the economy bounce back from the coronavirus-induced decline that we’ve been witnessing for several months.

As well as incentives to back businesses and increase cash flow, the government has made changes to instant asset write-offs, resulting in a potential life raft for small businesses experiencing a sharp drop in revenue.

Here’s what you need to know about the changes made to instant asset write-offs:

How is it different?

As of October 6, 2020, businesses earning less than $500 million in annual revenue will be allowed to claim a full deduction of new assets worth up to $150,000, while small and medium businesses will also be eligible to write off the full value of second-hand assets purchased before December this year.

This is a noteworthy jump from the original threshold of $30,000 in the previous financial year, and promising news for businesses currently experiencing a drop in revenue.

Who’s eligible?

Businesses that have an annual turnover of less than $500 million, factoring in the turnover of affiliated businesses, are eligible to use instant asset write-offs.

The eligibility criteria also looks at the date the assets were purchased, installed and used, and must be between March 12 2020 and December 31 2020.

Finally, the assets need to fall under the new $150,000 threshold.

It’s worth noting that you can claim a deduction for multiple assets, ensuring each asset is valued under $150,000 separately.

What can be claimed?

According to ATO, any asset that’s business-related and under the threshold can be written off — with a few minor exceptions.

A business must use the general depreciation rule on assets that are leased out more than 50% of the time; software that’s allocated to a software development pool; capital work deductions; and, interestingly, horticultural plants

If you’re writing off big-ticket items like a car, the amount you can claim of the full price is limited to how often it’s used for business-related matters, and cost of the car cannot exceed $59,136 for the 2020-21 financial year.

For example, say you purchase a Hyundai iLoad at $41,000, and you use the van for 75% business use, you can write off 75% of the $41,000 you spent.

For a full rundown of what’s eligible and what’s not, head here.

How to apply for a write-off

The instant asset write-off can be filed with your standard tax return, however, it’s recommended that you chat to your accountant before making big purchases with the expectation that you’ll be able to deduct its value — the last thing you want to do is drop a lot of money and discover later down the track that you can’t actually get any of that money back.

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