Instant asset write-off extended to 31 December 2020

The Federal Government has announced that it will extend the $150,000 instant asset write-off, for a further 6 months until 31 December 2020. This is following the expansion of the programme from assets worth $30,000 to $150,000 in response to the March COVID-19 pandemic.

The $150,000 write-off had previously been due to expire at 30 June 2020.

What is the $150,000 instant asset write-off?

The instant asset write-off is where eligible businesses can claim an immediate deduction for the business portion of the cost of an asset. The deductible amount for each asset is $150,000 (up from $30,000). The assets must first be used, or installed for use, in the income year you’re claiming for.

Assets can be new or second hand and can include, for example, a truck for a delivery business or a tractor for a farming business.

How do you calculate the asset write off?

The amount you can write-off will depend on when the asset was purchased and the associated threshold amount. Thresholds and eligible turnovers recently changed on 12 March 2020, check the ATO website for details.

For example, if your company’s turnover is under $500 million and you purchase an eligible asset for $140,000 (excluding GST) on 1 June 2020 (and install it ready for use by 30 June 2020), then a deduction of $140,000 can be claimed. If the company is subject to a tax rate of 27.5% then this should reduce the tax payable by the company for the 2020 income year by $38,500.

How do I claim the instant asset write-off?

If you buy an asset that comes under the threshold, you can claim the business portion of the asset’s use in your tax return for that financial year.

You can claim a deduction for multiple assets as long as the cost of each individual asset is within the relevant threshold.

Feel free to contact us to speak to a business adviser for more information on the instant asset write-off. We can advise you on your best financial options and how to claim the instant asset write-off.