If you're a small business owner in Australia,
then stick around to learn everything you need to know about the Instant Asset Write Off.
Especially now that the government has just extended the current scheme until 2023!
Hey everyone, Kim Quach from Duo Tax here.
In today’s video, I want to talk about one of the BIGGEST tax benefits that
you can have as a small business owner in Australia - the instant asset write off.
This is a great way for your business to make some BIG savings when purchasing brand new
equipment or other assets. We'll go through all the ins and outs of what it means, so stay tuned!
Before we get into it, we want to be clear that this video is for informational purposes.
In no way should you interpret this as tax advice. We always recommend working with a
qualified accountant or tax agent to give you the best advice for your situation.
Alright, let’s get into it!
Under the Instant Asset Write-Off rule, small businesses can immediately claim a
small business deduction for the cost of the business-use portion of a brand new asset
in the same year that you first used it or installed it.
You can use the instant asset write-off rule to claim immediate deductions
on any new and second-hand assets - as long as the cost of the asset
is less than the threshold and you meet the turnover eligibility criteria.
Until recently, each depreciating asset’s threshold amount used to be
$150,000 for companies with an annual turnover of less than $500 million.
BUT in response to the global Coronavirus pandemic,
the Federal Government made some BIG CHANGES.
Now, businesses with an annual turnover of up to $5 billion can immediately claim
an immediate deduction for the cost of their BRAND NEW asset when first
used and installed before 30th June 2023.
What’s MORE, the TOTAL cost of the asset can be claimed, so there is NO threshold amount!
Initially, this was in effect until 30 June 2022,
but after the 2021 to 2022 Federal Budget announcement - it’s now extended to 30 June 2023.
Small and medium businesses with aggregated turnover of $50 million
or less can still claim the instant asset write off for second hand purchase assets.
This would be for assets that are held and first used or installed between 20th October 2020
and 30 June 2022. So this is another great and handy way to take advantage
of the instant asset write off in conjunction with brand new asset write offs.
It's a really simple system, but it'll make a massive difference for your bottom line.
We recently put together a tax depreciation report for one of our clients.
For interest's sake, I wanted to compare what it would look like without the instant asset
write off rule and then what difference it made claiming with the instant asset write off scheme.
Without it, you can see that the client claimed $44,164 for plant and equipment
assets for the period between the first of Feb 2021 and the 30th of June 2021.
Look, $44,164 is still a really good saving
for five months. It just shows you how beneficial a depreciation schedule is!
Now let’s look at the client’s deductions after applying the instant asset write-off scheme.
In the same five-month period between the first of Feb 2021 and the 30th of June 2021,
they could claim $154,825 worth of plant and equipment.
That’s almost a 30 per cent difference in savings!
So the point I’m trying to illustrate here is that while it’s available,
take every chance you can get to use the extended limitless write-off. You have the
next year to buy new assets and save more on their deductions than you ever have before.
If you own commercial property or even rent a commercial premise
and have been thinking about undertaking new fit-outs or refurbishments, now would be the
perfect time to do it because you can claim an instant deduction for the construction costs.
And REMEMBER - a tax depreciation schedule is your greatest tool
for saving on depreciation deductions.
That’s it from me!
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I’m Kim Quach from Duo Tax, see you next time!