Your Immediate Asset Write-Off Guide
Are you operating a small business? Have you opted to use the simplified depreciation rules? If so, in April 2019 your immediate write off threshold was increased to $30,000. So – if your small business’ turnover is less than $50 million, here is what you need to know:
What is the immediate write off threshold?
The immediate write off threshold for small businesses is now $30,000 for assets acquired/ready for use after 2 April 2019 up until 30 June 2020.
When can I claim the immediate write off on my upcoming asset purchases?
The cost of your eligible assets below $30,000 can be deducted in the financial year that the asset was purchased/ready for use. For example, machinery purchased now but installed on site at 1 July 2019, or a vehicle ordered now but delivered on 1 July 2019 would not be claimable until the 2020 financial year.
Does it matter whether I purchase the asset using cash or finance?
The immediate write off can be utilised regardless of how the asset purchase is funded. However, do not leave it until the last minute if finance approval is needed and you wish to purchase the asset before 30 June 2019. Note – GST registered businesses are generally able to claim back GST on the asset purchase, whether it is paid using cash, chattels mortgage, hire-purchase agreement or loan funding.
How does GST affect the threshold?
If you are registered for GST, the threshold applies to the total cost excluding the GST component. E.g. a vehicle costing $33,000 ($30,000 excluding GST) would be eligible for the immediate write-off, as well as its $3,000 GST component.
If you are not registered for GST, the total cost of the asset (including any GST listed on the invoice) must not exceed $30,000. E.g. the same vehicle would have to have a maximum purchase value of $30,000 (including GST) to be eligible for the immediate write-off.
What are some other tips?
- For vehicle purchases, be careful that any initial accessories are included as part of the total costs when applying the $30,000 threshold.
- The total cost of vehicle trade-ins are NOT reduced from the purchase cost when applying the threshold.
- It is possible to claim the threshold for multiple asset purchases, providing they are not part of a ‘set’.
- Also, check with your accountant/obtain professional advice to ensure that you will be eligible for the immediate write-off.
It is important that you act quickly if you intend on claiming the immediate asset write-off on your before 30 June 2019. Also, obtaining finance allows you to obtain a deduction during the year the asset is acquired/ready for use and pay later.
If you need any more information on how to navigate the Immediate Asset Write-Off, or guidance on how to access it, get in touch with the Finance team at McKinley Plowman (Paul Moran and Paul Tate) on 08 9301 2200 or visit www.mckinleyplowman.com.au/contact-us/ to book an appointment.
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