Us small businesses have been celebrating the recent extension to the instant asset write-off 2019 threshold that was announced during the 19/20 Federal Budget speech. The increased amount from $25,000 to $30,000 will allow more small and medium business owners to invest further in development by instantly writing off depreciable assets that cost the business less than $30,000.
Although this is a great move on the part of the government, the write-off has caused a lot of confusion and several business owners are still unaware of the scheme and how they can use it for investments. And that’s not really surprising given that most small businesses don’t have the start-up capital to make the initial investment. The result is, a lot of hardworking people are missing out on a tax break that can really help their business.
So, if you’re wondering about the finer details like the rest of us, or you’re just thinking about what you need to purchase first, here’s a quick breakdown of what a small business should know about the instant asset write-off 2019.
How does the Instant Asset Write-off 2019 work?
To get a clear understanding of the changes to the instant asset-write off 2019, we called in some professional help and spoke to the highly regarded global accounting firm Grant Thornton, who gave us the low-down on how the instant asset write-off works. As you already know, tax deductions are available for business owners that make purchases for further investment in the business. The purpose behind the instant asset write-off is to speed up the process at which you can make and claim deductions for those purchases while boosting revenue channels through investments.
The instant write-off scheme lets small businesses instantly deduct depreciating assets that cost $30,000 or less for purchases made after 2nd April 2019 (purchases made from 29th January to 2nd April are only eligible for the $25,000 instant write-off), and the tax deduction is claimed on the tax returns for that financial year. The write off can also be applied to multiple assets as long as each individual asset costs less than $30,000.
Another point to remember is that whatever is purchased must be ready for immediate use to be eligible for the write-off. That means the asset must be installed, in-use or ready for use after purchasing in the same financial year. For example, if you bought an asset in June, but it’s not ready for use until September, then it’s not eligible for the write-off.
What’s the difference from the previous rules?
The main difference is that the previous threshold was only $25,000 and purchases that exceeded the limit were only able to be partially written off every year, in accordance with the depreciation rate of the asset.
Since the introduction of the new scheme, now businesses can write off the full cost (assuming it costs $30,000 or lower) of the asset in the same financial year instead of depending on the depreciation rule (which still applies to assets greater than $30,000). Consult with an account for more information on your individual situation.
In addition, the instant asset write-off 2019 is now available for businesses with an annual turnover of $50 million or under, whereas previously the limit was $10 million or less. This means medium businesses are now also eligible for the write-off.
What about assets that are split between home and work?
A tricky one for those of us who jungle assets like vehicles and laptops for both work and home use, but there is some relief. According to Grant Thornton, we can still claim deductions on the asset, however, it won’t be a full write off as the tax will only apply to the amount of time the asset is used for business purposes. For example, if you bought a vehicle for $30,000 but only use it for business purposes 50% of the time while the remaining is for personal purposes, then you can only write-off $15,000 (50% of the total cost).
It’s still uncertain whether the current scheme will be extended after its scheduled expiry date (June 2020), so if your business has the cash flow to support the purchase then do take advantage of the instant write off as soon as possible. Make the most of it by investing in something that will have a long-term positive effect for your business like replacing outdated equipment or boosting your web presence with a professional digital marketing strategy to engage more customers and increase sales.
The instant asset write-off 2019 is the perfect opportunity to invest in the website you’ve always wanted for your small business. Netstripes has several affordable business plans for web solutions that include in-depth web strategies, brand positioning, and designs, all of which can be deducted through the instant asset write-off scheme.
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