Have you heard about the tax deduction of the cost of an asset for small businesses in Australia?
This allows businesses to claim an immediate tax deduction for the total cost of business assets purchased between October 6th 2020, and June 30th 2023.
Here, we cover everything you need to know about the asset write-off, including eligibility criteria, asset types, and limitations.
Eligibility Criteria for the Temporary Full Expense Tax Write-Off
To be eligible for the instant asset write-off, your business must have an aggregated turnover of less than $5 billion. Your aggregated turnover must be below $50 million if it is a second-hand asset.
It’s important to note that the asset must be purchased after October 6th 2020, and installed or ready for use by June 30th 2023, to be eligible for the deduction.
Asset types
The instant asset write-off can be claimed for a wide range of assets, including:
- Equipment and machinery: This includes computers, printers, and other office equipment, as well as heavy machinery used in manufacturing, construction, and agriculture.
- Vehicles: The instant asset write-off can be claimed for business vehicles, including cars, vans, and trucks. The scheme covers the cost of the vehicle up to the threshold, including any modifications and accessories necessary for business use.
- Tools and equipment: This includes hand tools, power tools, and other equipment used in construction, manufacturing, and other industries.
- Furniture and fittings: The instant asset write-off can be claimed for office furniture, fittings, and fixtures, including desks, chairs, and lighting.
Limitations
While the temporary write-off can significantly reduce your tax liability and invest in your business, some limitations exist.
These include:
- The threshold for the asset cost write-off is $150,000 (excluding GST) per asset. This means that if an asset costs more than $150,000, it cannot be claimed under this deduction. However, you may still be able to claim the asset over time through depreciation.
- The asset must be used predominantly for business purposes in Australia. This means that only the business portion of the cost can be claimed if the asset is used for business and personal use. The asset needs to be primarily used in Australia.
- Assets allocated to a low-value or software development pool cannot be claimed under this deduction.
- Any buildings and other capital works that can be deducted under Division 43 will not be eligible for this write-off.
- If the asset has a limited practical life and is reasonably expected to decline in value, you can claim the asset’s cost over time rather than the total cost upfront.
Reduce your liability for business growth.
The temporary full-expense tax write-off is a valuable deduction for small business owners. It allows a business owner to invest in their business and receive immediate benefits.
However, keeping accurate records of all assets purchased and any modifications or accessories is essential to ensure that you can claim the write-off correctly.
Taking advantage of the temporary full-expense tax write-off can free up valuable resources to help your business grow and thrive.
Please note that this article is a general overview. If you want a detailed understanding, you can download this publication created by the Tax Institute or contact a professional.
Contact us to find out your options and make the most of your temporary full-expense tax write-off.
