Expanded instant asset write-off for businesses

If a taxpayer has purchased assets for their business, they may be eligible to claim an immediate deduction under the instant asset write-off expansion. From 12 March to 30 June 2020 inclusive, the instant asset write-off threshold for each asset increased to $150,000 (up from $30,000) for business entities with aggregated annual turnover of less than $500 million (up from $50 million).

To get it right, remember:

• check if the business is eligible;
• both new and secondhand assets can be claimed, as long as each asset costs less than $150,000;
• assets must be first used or installed ready for use between 12 March and 30 June 2020;
• a car limit applies for passenger vehicles;
• if the asset is for business and private use, only the business portion can be claimed;
• a business can claim a deduction for the balance of a small business pool if its value is less than $150,000 at 30 June 2020 (before applying depreciation deductions); and
• different eligibility criteria and thresholds apply to assets first used or installed ready for use before 12 March 2020.

Car limit still applies

The ATO has reminded taxpayers that the increased and expanded instant asset write-off is still subject to the car limit of $57,581 for the 2019–2020 financial year. As businesses prepare for their end of financial year tax planning, the ATO said it is receiving questions about how the write-off applies to vehicles.

The write-off does not apply equally to all vehicles. The car cost limit of $57,581 for the 2019–2020 financial year applies to passenger vehicles (except motorcycles or similar vehicles) designed to carry a load less than one tonne and fewer than nine passengers. Taxpayers cannot claim the excess cost of the car under any other depreciation rules. However, a taxpayer can claim less than the $150,000 threshold for other vehicles (eg trucks and machinery). The car limit does not apply to vehicles fitted out for use by people with disability.

If a taxpayer uses the car for business and private use, only the business portion can be claimed. The deduction is also limited to the business portion of the car limit (if it applies to the vehicle). For example, if a taxpayer uses their car for 75% business use, the total that can be claimed is 75% of $57,581 for 2019–2020.

If a taxpayer has ordered and paid for a car by 30 June 2020 but not received it by that time, the ATO says the taxpayer cannot claim the increased write-off. The taxpayer must have first used the car, or have had it delivered ready for use, between 12 March 2020 and 30 June 2020. Different eligibility criteria and thresholds also apply to assets first used, or installed ready for use, before 12 March 2020.

If you would like to know more please contact one of our accountants on 07 4639 1099 or come in and see us at 4 Bowen Street Toowoomba.