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Instant asset write-off increased to $30,000 and expanded to businesses under $50 million

Instant asset write-off increased to $30,000 and expanded to businesses under $50 million

The threshold for the popular $20,000 instant asset write-off is set to increase to $30,000* from Budget night until 30 June 2020. After this time it may (potentially) return to its original $1,000 level on 1 July 2020, although we note that the threshold has been at or above $20,000 since 12 May 2015.

The Government had previously announced an increase to the threshold for the instant asset write-off to $25,000 from 29 January 2019 (however this measure was not legislated prior to the release of the Budget). The Government however, has announced that it intends to honour this rate increase.

Further, the number of businesses that can access the instant asset write-off will expand. To qualify for the write-off currently, businesses must have an aggregated turnover of under $10 million. This will be extended to businesses with an aggregated turnover under $50 million from Budget night. Below is a short history of the write-off:

Instant asset write-off
thresholds
Small Business* Medium business**
1 July 2018 – 28 January
2019
$20,000
29 January – 2 April $25,000
2 April – 30 June 2020 $30,000 $30,000

* aggregated turnover under $10 million / ** aggregated turnover under $50 million

Assets must be used (or installed ready for use) from Budget night until 30 June 2020 to qualify for the higher threshold. Previous purchases do not qualify for the higher rate (but may qualify for the $20,000 or $25,000 threshold dependent on the timing). Further, anything purchased but not installed and ready for use by 30 June 2020 will not qualify.

It should be noted that the instant asset write-off only applies to certain depreciable assets.  There are some assets (such as horticultural plants, capital works (building construction costs etc.), assets leased to another party on a depreciating asset lease, etc.) that don’t qualify.

For assets costing $30,000 or more

For small businesses (with an aggregated turnover under $10 million), assets costing $30,000 or more can be allocated to a pool and depreciated at a rate of 15% in the first year and 30% for each year thereafter. If the closing balance of the pool, adjusted for current year depreciation deductions is less than $30,000 at the end of the income year, then the remaining pool balance can also be written off.

The ‘lock out’ laws for the simplified depreciation rules (prevening small businesses from re-entering the simplified depreciation regime for five (5) years if they opt-out) will continue to be suspended until 30 June 2020.

Please note: pooling is not available for medium sized businesses (which means that the normal depreciation rules based on the effective life of the asset will apply to assets that don’t qualify for an immediate deduction).

IMPORTANT: This initiative is subject to the passage of legislation.

NOTE: $30,000 exclusive of GST for GST registered businesses / $30,000 inclusive of GST for businesses not registered for GST.

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