If you are a small business with an annual turnover of less than $2 million, you can claim the entire cost of an asset for immediate write off if its cost is under $20,000, even if the asset is old or second hand!
All depreciating assets are included under this new immediate write off threshold including:
- Computer hardware – computers, printers, phones, laptops, etc
- Tools and equipment
- Shopfront fit-out assets – air conditioners, signs, furniture and fittings
Although, note that not all assets are included under this change. See the ATO website for more information.
What does the $20k small business asset write off mean?
It means that if you purchase an asset for your business that is up to $20,000, you will be able to claim it as an immediate tax deduction in the year that you acquired it. This does not mean that you will get $20,000 from the ATO, as some people seem to think, but if you have a yearly income of $100,000 and buy an asset for the value of $20,000 in the 2015-2016 financial year, you will now have a taxable income of $80,000.
What happens if an asset costs more than $20k?
If your asset cost you more than $20,000, it can not be claimed as an immediate write off. Instead, it must be included as a Small Business Pool asset so you will receive a 15% deduction in the first year and 30% deduction in the second year, as per usual. If, however, the balance of your Small Business Pool drops below $20,000, you will be able to claim the balance of the pool.
Is the small business asset write off inclusive of GST?
It depends. If your business is registered for GST, then the cost of the asset exclusive of GST is used. So for example, if you purchased something for $22,000, you would claim the 10% GST of $2,000 making the cost of the asset $20,000 and therefore eligible for the small business asset write off. If your business is not registered for GST, then the cost of the asset is recorded as being inclusive of GST so the same $22,000 asset would not be eligible for the small business asset write off for a business that is not registered for GST.
When does this apply
The small business asset write off is not a permanent change. The change was bought in from the 12/05/2015 and will revert back to the original $1,000 threshold as of the 1 July 2017.
|Immediate write-off thresholds|
|Current threshold from 7.30pm AEST 12/05/2015||$20,000|
|01/01/2014 to prior to 7.30pm AEST 12/05/2015||$1,000|
|01/07/2012 to 31/12/2013||$6,500|
|01/07/2011 to 30/06/2012||$1,000|
What does this mean for your business?
If you have been thinking about purchasing assets under $20,000, this may be the perfect opportunity to purchase them and take advantage of this incentive. Tax incentives are great news for small businesses, however, if you are purchasing assets just for the sake of the immediate write off, it may not be the wisest decision. As always, ask yourself, “do I really need this in my business”, and if the answer is yes, then this could be great news for you!
Get in contact with one of our accountants to talk about when would be the best time for you to make these purchases to maximise your returns. Call us on (07) 5598 3800 today