Federal Budget night announced an increase in the instant asset threshold, and also an extension of which businesses could access the measure. Now the Treasury Laws Amendment (Increasing and Extending the Instant Asset Write-Off) Bill 2019 has achieved Royal Assent. (And it did so on 6 April, so your affected clients may appreciate the reminder.)
The instant asset write-off threshold increased from $25,000 to $30,000 from Budget night to 30 June 2020.
One complication (although, really it’s not that complicated) is that there will be relevant dates or periods that will have different thresholds applying. Practitioners will need to be aware of three different thresholds that could apply over one financial year (2018-19). The ATO table below is a handy reference:
The threshold applies on a per asset basis. As a result, eligible businesses can instantly write off multiple assets costing less than $30,000 that are first used, or installed ready for use, from Budget night to 30 June 2020.
The instant asset write off has also been expanded to apply to both “small businesses” (those with an aggregated annual turnover of less than $10 million) and medium sized businesses (an aggregated annual turnover of $10 million or more, but less than $50 million).
Notes for clients
The ATO points out that the entire cost of the asset must be less than the instant asset write-off threshold, irrespective of any trade-in amount. Whether the threshold is GST exclusive or inclusive will depend on your client’s GST status. For further information about GST ramifications, see this ATO web page.
In working out the amount your client can claim, they must subtract any private use proportion. The balance (that is the proportion used in earning assessable income) is generally the taxable purpose proportion. While only the taxable purpose proportion is deductible, the ATO says the entire cost of the asset must be less than the threshold.
Note that if your client later sells or disposes of an asset for which they have claimed an instant asset write-off, they will need to include the taxable purpose proportion of the amount received for the asset in their assessable income.