UPDATED 7 JUNE 2021: with the EOFY fast approaching, now is the time for small businesses to make the most of the Instant Asset Write Off. Small businesses could realise immediate benefits in acting before June 30, but as always there’s plenty to consider so read on for more information.
While the announcement is great news and will help some 3.5M Aussie businesses get through the end of the pandemic, there are greater implications for businesses to consider in the next month.
What does it cover?
The $150,000 Instant Asset Write-Off provides businesses with an asset write-off of up to $150,000 for assets costing less than the instant asset write-off threshold which are purchased and used in the year that the write-off is claimed. It’s available to businesses with an aggregated income of $50M and the assets written off must be below the program threshold, and be written off in the financial year they are purchased.
What can it be used for?
There are plenty of nuances to what can be written off, which of course any business considering this should discuss with their Financial Advisor or Accountant, but broadly speaking, the program is targeted at purchased assets that are used in the creation of income for a business. These could include purchasing:
For the full details, visit the ATO website.
Why should businesses consider acting now?
While every business will have their own unique situation, there are potential benefits to taking advantage of the Instant Asset Write Off before 30 June 2021. Primarily, if a business purchases an eligible asset and can write it off, they could benefit from the depreciation in their FY21 tax return. Potentially 12 months faster than if they were to purchase the asset from July 1, 2021 – in the FY22 financial year.
Additionally, in some cases, businesses may have realised a significant profit in FY21 and may want to use an Instant Asset Write Off to reduce taxable income. As always, we recommend businesses look to the ATO website, or speak to their Financial Advisor for guidance.
What Should Businesses be careful of?
While $150,000 is an enticing amount to make use of, businesses should consider what they intend on doing with assets in the long run. For instance, a vehicle purchased for work can be sold at a lower value in the future. With the Instant Asset Write-Off depreciating the entire purchase price in year one, any subsequent sale of the vehicle will be considered profit – which is taxed.
So alternatively, businesses may want to consider purchasing assets that aren’t likely to attract a high resale value or are simply unlikely to be sold. Assets such as corporate websites generally are owned permanently, while plant equipment and machinery are usually used to their end of life or when technology makes them obsolete. These types of purchases could help Australian businesses take advantage of the Instant Asset Write-Off now and reduce implications in future years.
The ATO Provides further information on this.
How can I help my clients take advantage of the Instant Asset Write-Off?
To help your clients seize the moment, for any loan funded before June 30, 2020, we’re offering $500 off the standard documentation fee.
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