If you own a business with an annual turnover of less than $5 billion, you may be eligible for the instant asset write-off scheme. The Australian Government has recently extended the scheme to cover the 2022/23 tax year, which means you can claim an immediate tax deduction for the full cost of qualifying assets installed or in use by June 30, 2023.
Here’s what you need to know about the scheme:
How the Instant Asset Write-Off Works
The instant asset write-off allows you to claim a tax deduction for the full cost of an asset up to $150,000. This means that you can purchase multiple assets under the threshold and write-off the total expense on your yearly tax return. The scheme includes both new and second-hand assets for small businesses with an aggregated annual turnover of less than $500 million.
Example of How the Instant Asset Write-Off Works
By using the instant asset write-off scheme, you can reduce taxable income and free up capital for business investment. For instance, if your business purchases $75,000 of eligible assets during the financial year and the total value of the assets is deducted from the net taxable income, you could save up to $18,750.
Assets Must Be Installed or in Use by the Deadline
To qualify for the instant asset write-off scheme, assets must be in use or installed and ready for use before the deadline of June 30, 2023.
Exclusions From the Scheme
While the instant asset write-off scheme covers all new assets that qualify under the existing depreciable asset criteria, some types of assets do not qualify and are excluded from the scheme. For more information on excluded assets, visit the Australian Taxation Office website or consult your tax advisor.
Can Assets Purchased Under the Scheme Be Sold at a Later Date?
If you sell an asset purchased using the instant asset write-off scheme, you must include the amount you received in your net taxable income for the financial year.
Business and Personal Use Assets
You can only claim the write-off for the percentage of the asset that is used for business purposes. For an asset to qualify for the scheme, the total cost of the asset needs to remain less than the $150,000 threshold.
Assets That Exceed the Threshold
If the cost of an asset exceeds the threshold, you will need to use general depreciation rules. Certain asset types may qualify for accelerated depreciation.
Which Assets Should I Consider Purchasing?
Before making any significant purchases, it’s important to determine how the asset will impact your business. Your decision to take advantage of the scheme should be based on your current needs and the planned growth of your business.
Looking for a Business Loan?
If you’re a business owner looking to take advantage of the instant asset write-off scheme but don’t have the cash on hand to make the necessary purchases, a financial loan may be the solution you need. Contact us today to learn more about our loan options and how we can help you access the funds you need to take advantage of this valuable tax deduction. Don’t miss out on the opportunity to boost your business’s bottom line – get in touch with us now!