Instant Asset Write-off decreasing for small business – What is changing:

One of the major announcements in the May Budget that will have an impact on small business is the reduction of the instant asset write off threshold from $150,000 to $20,000.

The instant asset write off is a tax deduction that allows businesses (with a turnover of less than $10M) to claim an immediate deduction for the cost of eligible assets up the a certain threshold. This means that if your business was to purchase eligible assets such as vehicles, plant & machinery, office equipment or computer equipment costing less than $150,000 you will be able to claim an immediate tax deduction for the entire value of the asset in your current year tax return which could immediately improve cash flow by resulting in a significant tax saving.

With the $150,000 threshold set to end on June 30, 2023, business only have a short period of time to take advantage of the higher threshold if there are eligible assets they are looking to purchase in their business.

One important fact to remember before you rush out and order that new asset is that under the instant asset write off rules to claim the instant write off the asset must be used in the business, it must be new of if second hand not previously used by the business and most importantly must be installed or ready for use in the business on or before the 30th June which give the current supply issues on some assets may make it difficult to execute in time.

Just remember that if small businesses are looking to acquire business assets over the value of $20,000 that will fall into the 2024 tax year you are still able to claim a tax deduction for these assets it will just mean that the deduction will be spread over the effective life of the asset not as an instant 100% immediate deduction spreading out the tax advantage over a longer period.

Feel free to reach out to your accountant and discuss whether you should take advantage of the higher immediate deduction before the 30th of June 2023 if you have asset acquisitions in mind.