Businesses Benefit from Increased Asset Threshold

March 25, 2020

Businesses Benefit from Increased Asset Threshold

What is the increased asset threshold?

The instant asset write-off (IAWO) threshold has increased from $30,000 to $150,000. This increase will apply from 12 March 2020 until 30 June 2020, for new or second‑hand assets first used or installed ready for use in this timeframe.

The Government is expanding access so that more businesses can take advantage of the instant asset write-off. The annual turnover threshold for businesses is increasing from $50 million to $500 million. Expanding the limit will mean an additional 5,300 companies which employ around 1.9 million Australians will be able to access the IAWO for the first time.

What does this mean for my business?

An instant asset write-off allows businesses to claim immediate deductions for new or second-hand plant and equipment assets on purchases such as vehicles, tools and office equipment including time and attendance solutions.

An example scenario of how the instant asset write-off can help your business.

Peter owns a company, Pete's Windows & Doors Pty Ltd, through which he operates a large manufacturing business on the Sunshine Coast. Pete's Windows & Doors Pty Ltd has an aggregated annual turnover of $150 million for the 2019‑20 income year. On 1 April 2020, Peter purchases five new laser cutting machines for his production facility for $40,000 each, exclusive of GST.

Under existing tax arrangements, Pete's Windows & Doors Pty Ltd is not eligible for the instant asset write‑off and instead would depreciate the laser cutting machines using a practical life of 15 years. Choosing to use the diminishing value method, Peter's business would claim a total tax deduction of $4,456 for the 2019‑20 income year.

Under the new $150,000 instant asset write‑off, Pete's Windows & Doors Pty Ltd would instead claim an immediate deduction of $200,000 for the purchase of the laser cutting machines (i.e. $40,000 for each machine) in the 2019‑20 income year, $195,544 more than under existing arrangements. At the company tax rate of 30 per cent, Peter will pay $58,663.20 less tax in 2019‑20.

This lower tax rate will improve Pete's Windows & Doors Pty Ltd's cash flow and help his business withstand and recover from the economic impact of the coronavirus.

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. When it comes to trade-ins, the instant asset write-off is assessed based on the full purchase price of the item. The instant asset write-off covers the range of solutions available with Aussie Time Sheets. We offer a great range of solutions to suit any size business from any industry

Any items under $150,000 are included in the instant asset write off but you need an ABN, Australian Business Number, and an active enterprise. For more information and to check eligibility please visit the Australian Tax Office website.

So what are you waiting for? Take advantage of this tax benefit. Contact the friendly team at Aussie Time Sheets today to see how our time and attendance systems can save your business time and money.


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