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PKF Australia

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Iain Spittal

Partner

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Utilising the $20,000 Instant Asset Write-Off

The small business write-off threshold of $20,000 has been extended to 30 June 2018 and is available to all small businesses with an aggregated turnover of less than $10 million. After 30 June 2018, the threshold will reduce to $1,000.

If you have business expenses which you are thinking about delaying until the new financial year, now might be a good time to reconsider so that you can accelerate the potential tax deduction.

THE $20,000 INSTANT ASSET WRITE-OFF EXPLAINED

If you buy an asset to use for business purposes and it costs less than $20,000, you can immediately deduct the business portion of the cost in your tax return. 

This deduction is available for each asset that costs less than $20,000.  However, it is important to note that the cost of an asset includes both the amount you paid for it and any additional amounts you spent on transporting and installing it. 

When calculating the value of the asset, if you are registered for GST, you must exclude the GST amount you paid for the asset (i.e. the asset must have an installed value of $20,000 or less (GST exclusive)).

If you are not registered for GST, you must include the GST amount you paid for the asset (i.e. the asset must have an installed value of $20,000 or less (GST inclusive)).

WHAT ASSETS ARE INCLUDED/EXCLUDED?

HOW THIS WORKS

You buy a new computer for $6,800 that you use 80% of the time for business purposes and 20% of the time for personal purposes. You also buy a second-hand printer for $700 which you use 100% of the time for business purposes.

For the computer, you would calculate your instant asset write-off as 80% (the business use proportion) of $6,800, so you would claim $5,440.  For the printer, you would claim the entire cost of $700.

IMPORTANT THINGS TO NOTE

  • There is no limit to how many assets you can claim the deduction for. However, the installed value for each asset must be less than $20,000.
  • If you later sell the asset for which you claimed an instant asset write-off, you include the taxable purpose proportion of the amount you received for the asset in your assessable income.
  • If you choose to stop using the simplified depreciation rules or become ineligible to use them, you must use the general depreciation rules. However, any assets in your small business pool will continue to be depreciated in the pool.

Contact PKF to discuss how you may be able to best utilise the instant asset write off before the end of the financial year.


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