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Instant Asset Write-Off to be Extended to Other Small Businesses

After the new Federal Budget was handed down on 3 May 2016, small businesses can enjoy up to a total of $2.2 billion worth of tax deductions to be handed out in the next four years. “If we wish to continue to see our living standards rise with more jobs and higher wages, we need to ensure our tax system encourages investment and enterprise,” says Treasurer Scott Morrison in his budget announcement.

Among the tax advantages given to small businesses is the (temporary) extended instant write-off, which is now for businesses with an aggregated annual turnover of less than $10 million (from $2,000,000 in the last 2015 budget).

From 1 July 2016, small enterprises can claim a tax refund for purchasing equipment (whether new or second hand) for their businesses with a price of not more than $20,000. Office furnishings, desktop computers, air conditioners, kitchen equipment, and even cars used for the business can be claimed against tax as long as the price of each item does not exceed $20,000.

Listed below is the criteria required to be satisfied in order to be eligible for instant asset write-off:

  • The enterprise must be a small business entity with an annual aggregated turnover of not more than $10 million.
  • It must be a depreciating asset. The Tax Office defines a depreciating asset as “an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used.” Intangible assets such as in-house software, items of intellectual property rights, are mostly not categorized as a depreciating asset.
  • The asset must already be installed or is ready for use by 30 June 2017.

Keep a record of these business assets in order to support the claim for a tax deduction.

Please contact us if you are unsure if you meet the above criteria or would like to know more.

*Note that this instant asset write-off is based only on the Budget announcement and is yet to be legislated.

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