Do you know about the instant asset write-off for small businesses? Introduced by the Federal Government in 2015, the scheme allows small businesses to instantly claim deductions for assets up to $20,000. But if you haven’t heard of it before now, you’re not alone! MyBusiness reports that 78 per cent of small businesses don’t really understand what it’s all about, and up to two-thirds of businesses aren’t utilising it as well as they could be.
First things first – you can find out what it’s all about here. Basically, a registered business (with an ABN) with turnover up to $10 million since 1 July 2016 can claim an immediate deduction on certain approved assets up to $20,000. And that’s per asset, too.
It’s an excellent program for small businesses but there are some things you need to understand before you take advantage of it.
What’s an instant write off?
Unfortunately the flashy name may not necessarily mean what you think it does. You don’t get an immediate payment or benefit as such. What it really means is you can claim that asset as a deduction to reduce your taxable income in that financial year, rather than depreciating it over a number of years.
How often can I claim?
Each asset under $20,000 can be claimed as an immediate deduction, provided it meets the other criteria under the scheme.
Not everything is eligible (but most things are)
The write-off is available for a range of income-producing assets, like cars, vans, utes, trailers, motorbikes, lawnmowers, ovens, fridges, coffee machines, other machinery, kitchens, tables and chairs, carpets, printers, photocopiers, tools, welding equipment, saws, generators, pumps, solar panels, heating, hot water units, water tanks, air-conditioning units, sound and security systems, and computers.
Some things, like horticultural plants and in-house software are not eligible, so make sure you check before making any large purchases!
And like anything, it needs to be used in some way to generate income for the business. If it’s a mixed use asset (like a car that you also use for personal use) then only a percentage of the cost will be deductible, so have a chat to your accountant to make sure you know what’s what.
Second hand goods count too
There’s no distinction between new or second hand goods under this scheme, so if you’re buying used equipment you can still claim the deduction.
Don’t accidentally have your cake and eat it too
As a small business you’re likely in the habit of depreciating your assets over a number of years but you can’t do that on assets you’ve claimed a deduction for – it’s one or the other.
I would also caution you against buying up assets just for the sake of a deduction – if you don’t truly need the asset and it’s not having an impact on your taxable income it might not be worth the spend.
If you're ready to finance some new equipment or would like more information about how your business could take advantage of this tax break give me a call on 0412 534 503.