Update on small business instant asset write-off for 2019-2020

The instant asset write-off scheme for small business has been extended and the threshold increased from $20,000 between 1 July 2018 and 28 January 2019; to $25,000 between 28 January 2019 and 2 April 2019; and up to $30,000 between 2 April 2019 and 30 June 2020. Are you one of the 47% of business owners who don’t seem to know about this potential benefit?

On 29 January 2019, the Prime Minister announced that the government would increase the $20,000 instant asset write-off threshold to $25,000 effective from 29 January 2019, and the scheme would be extended until 30 June 2020. It was subsequently announced that the threshold would be lifted to $30,000 from 2 April 2019 until at least 30 June 2020.

“Business can go out and invest today, whether it’s a vehicle, a piece of plant or equipment, all of it, up to a $25,000, immediate write-down,” the Prime Minister said at the first announcement on 29 January 2019. At the second announcement, increasing the threshold to $30,000 from 2 April 2019, the Treasurer described the increase as “…allowing a cafe to get a new fridge or grill, a plumber to buy new tools or a courier a new van.”

The small business instant asset write-off scheme, first announced in 2015 as a short-term incentive for small businesses to invest in plant and equipment items for improving productivity, has been extended every year since. With the threshold originally set at $20,000, it meant that small businesses could instantly deduct eligible asset purchases as an immediate expense item rather than getting the deduction by depreciating the value of the asset in the accounts over time.

While some small business owners have become aware of the scheme and may now take advantage of the extension and threshold increases to $25,000 and $30,000 during the 2018-2019 financial year, there are indications that many small business owners haven’t claimed any instant write-offs yet, and a large number of business owners are still unaware of the scheme.

According to an article featured on the Smart Company business news website, research undertaken by American Express indicated that 47% of small businesses had never heard of the small business instant asset write-off scheme, and 52% of those who were aware of it hadn’t claimed anything. Fewer than 350,000 businesses claimed an eligible purchase under the program in 2016-17, according to the cited ATO statistics, and the average amount claimed was $11,000, well short of the maximum threshold for the 2016-2017 financial year.

How to claim a small business instant asset write-off under the scheme

The scheme is relatively straightforward, however, there are rules of eligibility for an immediate write-off and several conditions apply. For example, the entire cost of the asset must be less than the instant asset write-off threshold, irrespective of any trade-in amount. If you later sell or dispose of an asset for which you claimed an instant asset write-off, you would need to include the taxable purpose proportion of the amount you received for the asset in your assessable income. Also, if an asset purchased under the scheme is partly for personal use, the proportion of personal use will need to be taken into account in calculating the business proportion which can be legitimately claimed. While only the taxable purpose proportion is deductible, the entire cost of the asset must be less than the threshold. An exception to this rule is for businesses with turnover between $10 million and $50 million, which can claim a deduction of up to $30,000 for the business portion of each asset (new or second hand), purchased and first used or installed ready for use from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020, the end of the asset write-off scheme as currently indicated.

With the scheme extended until 30 June 2020, and the threshold increased to $25,000/$30,000 during the financial year 2018-2019, conditions remain favourable for small business owners to consider investing in new plant and equipment or assets aimed at improving business productivity. If you’re unsure about what types of assets might qualify as eligible under the scheme, or how to proceed with a claim, talk to us. Billings + Ellis can give you advice that’s specific to your small business needs and circumstances.