Can you use the extended $30,000 instant asset tax write off?
You may remember the previous instant asset tax write off Australian small businesses were granted over the last few years.
Last year we were looking at $25,000, the year before that we were looking at $20,000 and we now have a much welcomed extension $30,000 to play with.
We recently conducted a survey of over 1200 businesses who say that 39% of them had not used the write off. Many of whom likely don’t know what it is or what to do with it, since 91% said they would like to see it extended.
Are you in that group who want the scheme to remain but have never actually used it?
So who is it for and what can you use it for? What else do you need to know?
What has changed from the last few years?
With previous incarnations of the scheme, businesses turning over up to $10 million had the opportunity to instantly depreciate and write off assets up to $20,000.
Now, the limit has not only been extended to $30,000, but the cap of turnover has been raised. With previous limits of $10 million in revenue, we now have a massive cap of $50 million which opens up the scheme to many more businesses.
What is it again? I forgot…
Basically if you have bought a core piece of depreciating equipment or another work related asset, you can save on your tax bill with a nice offset.
You must be able to prove, however that the piece of equipment is central to your business and its operation.
This can include:
- Vans, trucks and vehicles
- Tools and trade equipment
- Computers and IT equipment
- Plant machinery
- Coffee machine/ Kitchen equipment
But do you really need it?
But will you benefit from a tax offset at all? Perhaps not.
There are several ways in which this would be of no benefit:
- You are operating at a loss.
- If you don’t really need the equipment as a core part of your operations.
- If you don’t have the capital to buy the equipment before any tax benefit kicks in.
- If the equipment does not contribute to cashflow.
Think really hard about whether you actually need anything. Many businesses don’t. This is not a free meal ticket after all as you will have to stump the initial costs and benefit from the write off later on.
Make sure your purchase is covered
From the ATO:
You are eligible to use simplified depreciation rules and claim the immediate deduction for the business portion of each asset (new or second hand) costing less than $30,000 if:
- You have a turnover less than $50 million, and
- The asset was first used or installed ready for use in the income year you are claiming it in.
- The asset may be either new or second hand.
- It must be directly linked to your business function.
- You may claim a portion for personal and for business. So if you use a delivery van for 30% work use and 70% personal use, you can dice it up and claim that 30% portion.
- You may not stockpile. You must have the equipment installed and in use for business purposes by EOFY.
- You must be an operational business, not a holding for investment purposes.
The contents of this blog is of a general nature and for guidance only. Reckon do not provide professional advice. Viewers should consult with a professional adviser for advice on their specific circumstances.