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The instant asset write-off has been extended for another year. This allows eligible small business owners with an aggregated turnover of less than $10 million to claim an immediate deduction for eligible assets that cost less than $20,000. To qualify, these purchases must be installed and ready for use in your business between July 1, 2024, and June 30, 2025.
The Labor government initially proposed a $20,000 instant asset write-off threshold for 2023-2024, intending to prevent it from reverting to $1,000 at the financial year's start. However, an amendment by Liberal Party Senator Jane Hume increased the threshold to $30,000. The amendments have now passed Senate but are not yet formally law.
Additionally, businesses with an aggregated turnover of less than $50 million are now eligible for these write-offs, up from the previous limit of $10 million. Small Business Minister Julie Collins noted that the original $20,000 limit, announced in the 2023-2024 federal budget, aimed to support small businesses' cash flow without increasing inflation.
The Coalition had pushed for a higher limit, with Shadow Treasurer Angus Taylor describing the expansion as a "modest measure" to assist businesses amid a "cost of living crisis." The expanded criteria will make approximately 26,500 more medium-sized businesses eligible for the scheme.The bill also supports the Albanese government's bonus tax deductions for small businesses investing in energy-efficient upgrades. It will return to the House of Representatives for final approval before becoming law.
Yes, the $20,000 threshold will apply on a per asset basis, allowing small businesses to instantly write off multiple assets.
If an asset costs more than $20,000, it can still be depreciated, but not immediately. Instead, it will be added to a general small business pool and depreciated over time - 15% in the first year and 30% in the following years.
For a small business entity to access the instant asset write-off threshold of $20,000, the following conditions need to be satisfied:
Additionally, the rule that normally prevents small businesses from switching back to simplified depreciation rules for five years after opting out has been suspended. This suspension will now be extended until June 30, 2025, allowing businesses more flexibility in their depreciation choices
Only assets that fall under the depreciation provisions are eligible for the instant asset write-off. Capital improvements to buildings, which are covered by the capital works rules, do not qualify for this write-off.
It's important to note that the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023, which includes the $20,000 instant asset write-off measure for the 2023-24 income year, is currently before Parliament and has not yet been legislated.
Business owners who want to benefit from this write-off should get professional advice to understand the limits and conditions that might apply when they purchase an eligible asset. They might need to consider the timing of their purchase to ensure they get the most benefit from the write-off, depending on whether and when the bill becomes law.
If you would like assistance in navigating the instant asset write-off in relation to your small business, please don't hesitate to get in touch with us via the form below.
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