How the instant asset write-off works?

Australia’s economic recovery is rapidly gaining pace, with good news coming in from all directions. For starters, there are those stunning GDP figures from the December 2020 quarter as well as February’s strong employment growth – with more people in full-time work in the month than March 2020, when Australian went into lockdown.

01 April 2021

Australia’s economic recovery is rapidly gaining pace, with good news coming in from all directions. For starters, there are those stunning GDP figures from the December 2020 quarter as well as February’s strong employment growth – with more people in full-time work in the month than March 2020, when Australian went into lockdown.

So it’s unsurprising that Roy Morgan found an increasing majority of businesses (55.5%) believe the next 12 months is a ‘good time to invest in growing their business’.

And the good news is, there’s an amazing tax break known as the instant asset write-off that can help you do just that.

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What is an instant asset write-off?

The instant asset write-off scheme was first introduced in 2015. The tax break allows you to claim an upfront tax deduction when you buy a depreciating asset for your business – rather than claim those deductions over several years.

The threshold amount for each asset has steadily grown over the years, rising to $30,000 in the 2019-20 financial year. Then the pandemic hit ... and it was all change again.

Firstly, the threshold temporarily increased to $150,000 and eligibility criteria widened to encompass larger businesses. Then it got extended. Finally, following the federal budget 2020-21, more measures were introduced to encourage investment. These now leave us with something known as ‘temporary full expensing’.

Temporary full expensing is exactly like the instant asset write-off … but beefed up so it’s even better.

Essentially, it does away with the threshold altogether, except for a car limit that applies to the cost of passenger vehicles – set at $59,136 for the 2020-21 income year. But other than that, the sky’s the limit (as long as the asset meets the existing criteria for depreciable assets).

As the name suggests, temporary full expensing has an end date, with the asset having to be first used or installed before 30 June 2022.

Who can access the new scheme?

You can access temporary full expensing if your annual turnover is less than $5 billion – which means only the largest of Australian businesses are excluded.

And if your turnover is less than $50 million, you can also claim a full deduction on second-hand purchases.

Want to take advantage of temporary full expensing but need funding? Get the expert advice you need on how to finance your investment. 

Contact Vie Financial on 1300 400 843 or fill in this enquiry form.