Before you file your 2020-2021 tax return, here’s everything you need to know about the instant asset write-off, writes Gerry Incollingo, the MD of LCI Partners
Changes to the instant asset write-off
Things have changed a little when it comes to the instant asset write-off as of March 12, 2020. There was an increase of the threshold amount to $150,000. Sole traders AND businesses who have purchased assets before December 31, 2020 and used or installed them prior to June 30, 2021, can claim back the full amount up to the threshold value.
The government has also amended the business eligibility requirements which means those companies who were not previously eligible may now be able to claim on purchases, providing they meet the above requirements and have an aggregated turnover of less than $500 million.
If your business meets the eligibility framework, you can claim for an immediate deduction in the year that your asset is installed and ready to be used. This can be used for multiple assets, providing the purchase price isn’t more than the relevant threshold. It also applies to new or used purchases.
What’s exempt from the write-off
There are some assets that are exempt from the instant asset write-off, and this includes those that aren’t located or used in Australia for work-related purposes, software development, some building or renovations costs (capital works), or depreciating assets used for horticulture such as fencing, plants and grapevines, water facilities like dams, tanks and irrigation, and storage facilities—grain bins, silos, above ground bunkers.
There are also claim limits placed on passenger cars that are used for business. So, even if the instant asset write-off is $150,000, if you purchase a luxury car, the threshold for this financial year (2020-2021) is $59,136. It will increase to $60,733 for 2021-2022.
When the cost of your purchase exceeds the threshold and you are a small business, the ATO recommends using the simplified depreciation rules to work out the cost of your claim.
Trying to understand what you can and can’t claim for during tax time can be complicated, especially if you have multiple assets you want to deduct. I highly recommend making an appointment with a certified taxation accountant to ensure how to maximise your tax return using the instant asset write-off.
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