Immediate Write Off For Individual Small Business Assets Costing Less Than $20,000

For the current 2017/18 financial year businesses may want to consider bringing forward asset purchases to before June 30 to take advantage of this concession.

Businesses with a turnover less than $10m can claim an immediate deduction for assets costing less than $20,000 up until 30 June 2018.  (Stop Press:- this deduction has been extended to 30 June 2019 as part of the May Federal Budget). Note that the business turnover threshold for this concession increased from $2 million to $10m on July 1, 2016.

Here are some key points to consider:

  • To be eligible, the asset must be purchased by a business turning over less than $10m
  • The asset can be new or second hand
  • The amount must be under $20,000 exclusive of GST (i.e. $22,000 including GST)
  • If you borrow to purchase the asset, the asset is still eligible
  • The asset has to be installed and ready to use by the deadline (purchasing a car to be delivered in the future won’t qualify until the car is delivered)
  • To claim the write off on a motor vehicle you will need to have a valid log book and claim only that percentage of the cost as an immediate write off
  • Some taxpayers may try to reduce the cost of an asset to under $20k by using a trade-in when purchasing the asset (for example a car). However, the monetary value of the trade-in will form part of the asset cost and not reduce the cost of the asset.
  • Any attempt to manipulate invoices etc. will attract the ATO's use of the anti-avoidance rules, thereby eliminating the $20,000 write off.
  • If your business has a small profit or even a loss, the write off will be of little or no benefit in the current year (losses are not refundable but can be
    carried forward to the next year)
  • Building structural improvements are not eligible for the instant write off
  • Depreciating assets valued at more than $20,000 will be depreciated in one pool at a rate of 15% in the first year and 30% in future years
  • If your pool balance at the end of the year is less than $20,000 before applying any other depreciation deduction, the entire pool balance can be written off
  • If your business is not a ‘Small Business Entity’ you will need to depreciate all assets purchased over $300. Any assets purchased for $300 or less can be written off immediately  

Other 2018 Year End Tax Planning Opportunities

Disclaimer: This newsletter contains general information only. Regrettably, no responsibility can be accepted for errors, omissions or possible misleading statements or for any action taken as a result of any material in this guide. It is not designed to be a substitute for professional advice, as such a brief guide cannot hope to cover all circumstances and conditions applying to the law as it relates to these items.