Published on 06/06/2019 by Any Business.Com.Au

EOFY: Let's make sense of this instant asset tax write-off thingy

We spoke often about the potential for a new instant asset tax write-off threshold should the Liberal Coalition government salute in the recent election.

Now that it has come to fruition it's time to make sense of this whole threshold, asset, taxation policy and how it may benefit your small business.

Breaking it down

The instant asset write-off threshold has now been increased to $30,000 and extended to 30 June 2020.

If you purchase an asset (new or second hand) costing less than $30,000 and it is used or installed ready for use from 7:30pm AEDT on 2 April 2019, you can claim a deduction for the business portion.

Different thresholds apply for assets purchased before that date:

from 29 January 2019 until before 7.30pm AEDT on 2 April 2019, the threshold is $25,000

before 29 January 2019, the threshold is $20,000.

You may purchase and claim a deduction for multiple assets provided each asset is under the relevant threshold.

Assets that cost $30,000 each or more can't be immediately deducted. You can continue to deduct them over time using the small business pool.

From 2 April 2019, the instant asset write-off has also been expanded to include businesses with a turnover from $10 million to less than $50 million.

Instant asset write-off thresholds

Excluded assets

You must use the general depreciation rules for the following depreciating assets – as they are specifically excluded from the simplified depreciation rules:

• assets that are leased out, or expected to be leased out, for more than 50% of the time on a depreciating asset lease
• assets you allocated to a low-value pool before using the simplified depreciation rules
• horticultural plants including grapevines
• software allocated to a software development pool (but not other software)
• capital works.

Timing

An asset must be first bought and used, or installed ready-for-use in the year you claim the deduction under the simplified depreciation rules. For example, a trailer that was purchased and stored in the shed but not yet fitted out for the intended business purpose would not be eligible.

Cost

The cost of an asset includes both the amount you paid for it and any additional amounts you spent on transporting and installing it ready for use. The cost also includes amounts you spent on improving the asset.

If you are registered for the goods and services tax (GST), you exclude the GST amount you paid on the asset when you calculate your depreciation amounts (and your instant asset write-off threshold is exclusive of any GST). This is because you will claim as a credit the GST paid in your activity statement for the relevant period. Our examples assume your business is registered for GST and unless otherwise stated, the GST has already been excluded.

If you are not registered for GST, you include the GST amount you paid on the asset in your depreciation calculations (and your instant asset write-off threshold is inclusive of any GST).

Trade-ins

When you trade a car or any other asset, typically the agreed price of your trade-in is deducted from the cost of your new asset. The sale and purchase of the asset may appear as one transaction.

There are two transactions, the purchase of a new asset and the disposal of an existing asset. If the purchase price of your asset (irrespective of the amount you were paid for your trade-in) is equal to or more than the relevant threshold, then it needs to be added to the small business pool and can't be immediately written-off.

Business use vs private use

The amount that you claim as a depreciation deduction is determined by how much you use the asset to earn assessable income.

You need to make an estimate (as a percentage) of how much you will use a depreciating asset in earning assessable income. This is referred to as the taxable purpose proportion.

Changes in business use

You must review how much an asset is used for business and other taxable purposes in each of the first three years.

If this proportion changes by more than 10% from your most recent estimate, you must make an adjustment.

Cars

• Allowable methods for deducting car expenses
• Car cost limit for depreciation

Allowable methods for deducting car expenses

If you deduct car expenses using the cents per kilometre basis, you can't also claim a deduction for the car under the simplified depreciation rules (as this method already allows for depreciation).

Note that if the car is owned or leased by a company or trust that qualifies for and has chosen to use the simplified deduction rules, its full cost will generally be depreciated under the simplified depreciation rules. In this case, any private use by you or other employees or associates will be subject to fringe benefits tax.

Regardless of what you might read or know for yourself about claiming at tax time, it's always best to speak to a tax professional - it's what they do!

AnyBusiness.com.au

Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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EOFY: Let's make sense of this instant asset tax write-off thingy

06/06/2019 by AnyBusiness.com.au

We spoke often about the potential for a new instant asset tax write-off threshold should the Liberal Coalition government salute in the recent election.Now that it has come to fruition it's time to make sense of this whole threshold, asset, taxation policy and how it may benefit your small business.Breaking it downThe instant asset write-off threshold has now been increased to $30,000 and extended to 30 June 2020.If you pu...