Instant asset write off scheme announcement.
The Government has recently announced and introduced legislation to Parliament for an extension to the instant asset write-off scheme for small business.
The scheme, introduced on May 12th 2015, has allowed small businesses to completely write-off as a tax deduction purchase of assets up to $20,000 in the year purchased.
The proposed changes are:
- Increase the threshold from $20,000 to $25,000 as of 29 January 2019, and
- Extend the date from 30 June 2019 until the 30 June 2020.
This scheme is now available to significantly more businesses as the criteria of being a small business has changed since this was first introduced. A “small business” is one in which aggregated annual turnover is up to $10 million.
The key benefit of the scheme is it allows for a business to enjoy the tax benefit of the purchase to be fully recognised in the year it is incurred rather than stretched out over several years as a depreciable asset. It means that there is more incentive to invest in the future with the knowledge of how it will affect their current circumstances.
The small business asset rules also allows business a simpler depreciation scheme for assets that are over $25,000 as well. Small businesses will be eligible to pool these larger assets in a general small business pool, which provides for a uniform approach to tax depreciation using two rates:
- 15% in the first year the asset is owned, and
- 30% every year after.
The pooled assets are considered one asset in themselves as opposed to having a register of individual assets, so it is intended to simplify depreciation calculations, as well as disposal of assets calculations.
Another benefit for other businesses can be found in the marketing opportunity this creates. Statistics indicate that many small businesses aren’t aware of this opportunity to reinvest in their business in a more tax effective manner. If you’re in the market of selling equipment to businesses, this can form part of your promotional material.
If you have any questions on how to best utilise this scheme for your small business, please contact one of our Tax Specialists who will be able to assist you. Complete your contact details below or give us a call on (03) 9835 8200.