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Myths of the instant asset write-off

myth of the instant asset write-off

Although it has been in existence for several years, you may be unaware of a small business tax concession which could save your business $$$ when it comes to tax time.

If your business is a small business entity (SBE) for tax purposes, you have access to the Simplified Depreciation Rules, commonly referred to as the $20,000 instant asset write off.

Under this concession, if you purchase an asset which is used in your business and the purchase value is under $20,000, you can claim the whole purchase price in the year it is purchased. This can be advantageous as normally assets are depreciated over the useful life of the asset (usually several years).

Given the potential tax savings at stake, there are several myths out there regarding the instant asset write off.

Myth #1: Multiple part payments of under $20,000 count:

This is false.

The simplified depreciation rules are applied based on the asset’s total value, not on the amount of payments applied.

An Asset which is purchased for more than $20,000 (in total) must be depreciated over the asset’s useful life using tax depreciation.

For example: a motor vehicle bought for $20,990 needs to be depreciated over several years. A motor vehicle purchased for $19,999 can be depreciated completely in the tax year it is purchased and used in.

Myth #2: Anyone can use the instant asset write off:

This is also false.

Only small business entities have access to the simplified depreciation rules. To be an SBE, you need to have a turnover of less than $10,000,000. If your business has a turnover higher than this, then you need to depreciate your assets over its useful life, regardless of its value.

Myth #3: The maximum amount will increase:

This is pending.

The government recently announced its intention to increase the maximum asset value amount to $25,000 and extend the availability of the concession to the end of the 2019/2020 financial year. The updated terms will apply on transactions from 29 January 2019 to 30 June 2020.

However, while this may benefit many small businesses, the update is not yet law and must pass the passage of Parliament before being available to SBE’s.


This information is not to be relied upon without speaking to your accountant, tax agent or financial adviser depending on the advice

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