Guide to the $150,000 and $30,000 small business instant tax write-off
Learn how to use the $150,000 and $30,000 tax breaks to get the most out of it for your small business.
Keeping cash flow positive is important to every business and making large, essential purchases can make that tricky. But the instant asset tax write-off offers a way for you to claim assets you purchase for your business up to a value of $150,000 from 12 March this year until 31 December 2020.
What's in this guide?
- What's happening with the instant asset tax write-off?
- What is the instant tax write-off?
- What other measures are being taken to help businesses as a result of COVID-19
- Is my business eligible to use the instant asset tax write-off?
- What assets can I write off?
- What are the dates for asset cost thresholds?
- Purchases over the threshold
- What about trading in an asset?
- Questions we've been asked about the instant asset tax write-off
What's happening with the instant asset tax write-off?
The instant asset write-off was initially raised to $30,000 as of 2 April 2019. However, in light of the coronavirus outbreak and the subsequent harm to Australian businesses, as of 12th March 2020 the instant asset tax write-off has been raised to $150,000. This was originally meant to revert back to a lower asset write-off on 30 June 2020, however on 9 June 2020, the government announced it will extend the $150,000 instant asset write-off until 31 December 2020. As of 1 January 2021, the instant asset tax write-off will be reduced to $1,000
These are measures that have been taken as a means of stimulating the economy in the face of the pandemic. This write-off is a great way for small businesses to make essential purchases without needing to wait to claim.
As of 12 March 2020, the instant asset tax write-off has also been expanded to include businesses with a turnover of up to $500 million (up from $50 million). This is good news for businesses with higher turnovers that require larger equipment purchases. Expanding the threshold also means that an additional 5,300 businesses who employ roughly 1.9 million Australians will now be able to access the instant asset tax write-off for the first time. Prior to 12 March, businesses with a turnover of between $10 million and $50 million could use the instant asset tax write-off (previously restricted to businesses with a turnover of less than $10 million).
Please note however, that the $150,000 tax write-off and $500 million turnover threshold is only available for purchases bought from 12 March 2020 onwards. Purchases bought between 2 April 2019 - 11 March 2020 will qualify for an instant asset tax write-off of up to $30,000.
The instant asset tax write-off is due to revert back to $1,000 for small businesses (turnover less than $10 million) from 31 December 2020.
What is the instant tax write-off?
As of 12 March 2020, small businesses can purchase eligible assets up to a value of $150,000 and claim them this year until 31 December 2020. Assets bought between 2nd April 2019 until 11 March 2020 will qualify for an instant asset tax write-off of $30,000. To claim for either threshold, you just need to make the purchase and use the asset for your business in the same year that you claim the deduction before 31 December.
Any single asset purchased under $150,000 from the 12 March, or $30,000 before 12 March, qualifies for the asset tax write-off. This means that if a business purchases multiple assets under these amounts, they should all qualify – even if the cumulative cost exceeds $150,000/$30,000. The cost of the asset includes both the amount you paid for it and any additional amount spent on transporting the asset, improving it or installing it for use.
What other measures are being taken to help businesses as a result of COVID-19
The new instant asset tax write-off has been implemented as a direct result of the damage to Australian industry by the coronavirus outbreak. The aim is to help businesses to recover and stimulate the economy. There will also be:
- Automatic grants of up to $25,000 provided to businesses with up to $50 million turnover
- Businesses can defer tax, including income tax assessments, fringe benefits tax assessments and excuse by up to 4 months
- Businesses that pay salary and wages will receive a minimum $2,000, even those not required to withhold tax
- Wage subsidies expected to benefit roughly 117,000 apprentices for employers with fewer than 20 employees
Is my business eligible to use the instant asset tax write-off?
Your business needs to meet the following criteria to use the instant tax write-off:
If writing off an asset purchased from 12 March 2020
- Your business had a turnover of less than $500 million in the last year
If writing off an asset purchased between 2 April 2019 and 11 March 2020
- Your business had a turnover of less than $50 million in the last year
What assets can I write off?
In order to be eligible for the instant asset tax write-off, assets must meet certain eligibility criteria:
- Entire cost of the asset must be less than $150,000 (from 12 March 2020) or $30,000 (before 12 March 2020), not just the business-use portion and inclusive of GST
- Asset can be new or used
- Asset purchased was first used or installed and ready to use in the income year you're claiming it in
Please note that assets bought outside of the threshold for the tax break will not qualify for the full amount. Asset cost thresholds have changed over the last few years, and only assets purchased from 12 March 2020 will qualify for the $150,000 tax write-off and assets bought after 7.30pm on 2 April 2019 qualify for the $30,000 tax write-off.
What are the dates for asset cost thresholds?
|Date range||Asset cost threshold|
|00:00am 12 March 2020 - 31 December 2020||$150,000|
|7:30pm 2 April 2019 - 11 March 2020||$30,000|
|29 January 2019 - before 7.30pm 2 April 2019||$25,000|
|7.30pm 12 May 2015 - 28 January 2019||$20,000|
|1 January 2014 - 7.30pm 12 May 2015||$1,000|
|1 July 2012 - 31 December 2013||$6,500|
|1 July 2011 - 30 June 2012||$1,000|
Purchases over the threshold
If your business purchase exceeds the asset cost threshold, there are a number of things you should know:
- You can pool the business portion of most higher cost assets and claim a 15% deduction in the year you start to use the asset or a 30% deduction after the first year.
- You can deduct the balance of the small business pool at the end of the income year if the balance is below the instant asset write-off threshold.
What about trading in an asset?
When it comes to trading in an asset, there are a few things to remember.
Purchases made from 12 March 2020
If you're trading in an asset and the process appears as two transactions – e.g. you purchase a new car for business purposes and sell your existing vehicle, then the cost of the new vehicle will need to be below the $150,000 threshold in order to qualify for the instant tax write-off. This is irrespective of the money made from selling the original asset. So, if your new vehicle is $180,000 but you made $35,000 selling your previous vehicle, even though the transaction cost a total of $145,000, you would still have to add the new purchase to your small business pool.
Purchases made before 12 March 2020
The same process applies to the lower threshold. So, if you purchases new equipment before 11 March 2020 and it came to $35,000, but you made $7,000 selling your old equipment - even though you were actually only $28,000 out of pocket (below the threshold) - you would still have to add the new purchase to your small business pool.
To find out more information regarding this, you can refer to the ATO website.
Questions we've been asked about the instant asset tax write-off
Can you buy a car with the instant tax write-off?
Yes, you can purchase a business vehicle and claim it this financial year as long as it is less than the threshold.
What do I do with assets that cost more than the threshold?
You cannot immediately claim these assets, and you will need to add these to your small business pool.
Can I claim depreciation on assets that I instantly write off?
No, you cannot claim depreciation in later years on assets that you immediately write off.
Can I instantly claim multiple assets?
Yes. You can claim multiple assets as long as they meet the criteria.
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