Have you used the 20K instant write-off to your advantage?

Have you used the 20K instant write-off to your advantage?

In last year's budget, Treasurer Joe Jockey announced an instant tax reduction that small businesses could claim on assets up to the value $20,000 if they had an annual turnover of less than $2,000,000. This temporary adjustment was put in place on budget night 2015 with an end date of June 30 2017, which means the scheme is still in place for another year.

The threshold for instant tax deductions was originally placed at $6,000; a figure that was reduced to $1,000 until 2015. The decision to raise the threshold right up to $20,000 allowed small business owners to claim a tax deduction immediately, rather than requiring them to spread deductions over a number of years. This could be in the form of power tools for a tradie, chairs and tables for a café owner or a new computer or machinery for a construction company.

For assets that are valued at $20,000 or more at the time of purchase, they can be added together in a simplified depreciation pool at a rate of 15% for the first income year and 30% from that point onwards. An immediate deduction can also be claimed if the balance of this pool does not exceed $20,000 over this period.

Are there any exclusions?

Some assets are not eligible for an instant tax deduction and must have the general depreciation rules applied. Other than those valued over $20,000, these include:

  • Horticultural plants
  • Capital works
  • Assets leased to a third party as a depreciating asset
  • Primary production assets which you have elected to use under the standard depreciation rules instead of the simplified scheme
  • Assets which have been allocated to a software development pool or low-value pool

Is it right for my business?

If you already need new assets regardless or think you can make a purchase that will improve your bottom line, this tax concession is a great opportunity. It's worth noting that this shouldn't be treated as a time to splash out on assets you don't need and land your business in unnecessary debt. If used wisely, however, an immediate tax deduction can be a great advantage for small businesses that are making an annual profit. Check with your accountant before making any decisions to make sure your best interests are put first and to find out if your assets are eligible under this system. You can also visit the ATO website for more information.

Published 17 May, 2016
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