21 May 2020
Small business introduction to instant asset write-off changes
The world struggles to come to terms with the ongoing reality of the coronavirus disease, there’s going to be an inevitable impact on small business in Australia. But the Federal Government recognises that businesses – and small to medium businesses in particular – are the lifeblood of the Australian economy. The government’s March 2020 Economic Stimulus Package, in response to challenges created by the spread of coronavirus, further extends the already very useful instant asset write-off taxation provisions for business.
The aim of this article is to give you an overview of the new instant asset write-off provisions. In the coming months, and before the end of the financial year, we’ll be providing further information about how to claim and what you can claim for, with explanatory case studies.
What exactly is an instant asset write-off?
Although instant asset write-off provisions have now existed for a number of years, the March 2020 amendments allow businesses with an annual turnover of less than $500 million to immediately write off, as an expense for tax purposes, individual new or second-hand asset purchases costing up to $150,000 each.
This means that instead of depreciating an asset over a number of years, you can effectively count the asset purchase as an expense in the current financial year, thus reducing your tax bill, provided you purchase the asset and have it installed and ready for use by 30th June 2020.
Extended provisions are only temporary
Businesses with a turnover of $500 million are clearly not small businesses, but small and medium businesses, however low their revenue, can benefit from the increase of the asset value threshold to $150,000, up from the previous $30,000.
The government’s media release makes it clear that these investment-boosting measures are only temporary. Unless either the new $150,000 threshold, or the previous $30,000 threshold, is later extended to continue beyond 30th June, the instant asset write-off threshold will revert to the long-term standard of $1,000 from 1st July 2020, along with a business turnover limit of $50 million. So now is the time to act, particularly if you have plans to purchase assets costing more than $30,000 each.
Boost your business activity and improve cash flow
There are many ways to take advantage of this concession, and you can even use it to purchase new assets your business might need. Now might be the time to consider your IT infrastructure: Is it geared up to allow your staff to work remotely in these uncertain times? Do you have the network bandwidth to support your business? Do you have the security software needed to combat ever-increasing cyber attacks? Consider any and all areas where you might be able to invest this extra funding in order to strengthen your IT ecosystem.
Having robust security is especially important during these times. Remote work can expose networks to breaches in a variety of ways, including unsecured wifi networks, vulnerable personal devices and scams that target remote workers. It might be prudent to invest in VPNs, security software upgrades and other safety features, in order to keep your remote workers – and your business – safe.
You can purchase and write off multiple assets under this program, not just one. So if you are considering business asset purchases which have an individual cost of between $1,000 and $150,000, you could save a lot of tax by bringing forward the date of your investment program to meet the 30th June 2020 deadline. At the same time you’ll be doing your bit to boost the economy and protect Australian jobs.