Small Business Instant Instrumentation Asset Tax Write-Off Scheme
The Immediate Equipment and Instrumentation Asset Tax Write Off Scheme is Still On!
Claim an Immediate Tax Deductions on Assets Costing Less than $20,000
|When did the instant asset write-off scheme commence?||
The law commenced 7.30pm AEST 12 May 2015 and will cease on 30 June 2017.
As announced in the 2016-2017 budget, the scheme has not been extended and will still be due to end June 30, 2017.
|Who Is Eligible?||
Any business that meets the definition of a small business entity, i.e. one with an aggregated turnover less than $2 million, may be eligible to claim an immediate deduction for the cost of depreciating assets acquired for less than $20,000.
From July 1 2016, the federal government will extend its $20,000 instant asset write-off scheme to business to businesses turning over up to $10 million however the scheme has not been extended and will still be due to end June 30, 2017.
|What Does This Mean?||
This means that a small business will be able to claim an immediate deduction for the cost of each and every depreciating asset that they purchase for less than $20,000.
For example, Pamela bought a second hand skid steer loader for $17,000 on 28 May 2015 which is used solely in her landscaping business. As the depreciating asset cost less than $20,000, Pamela will be able to claim an immediate deduction for this asset.
|What Does It Apply To?||
It should be noted that the measure applies to BOTH new and second hand assets.
It also applies on a per asset basis, so several assets each costing up to $20,000 would qualify for the write-off if installed ready for use before 30 June 2017.
|What About Assets Over $20,000?||Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed in the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter. The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools).|
Company ABC has a turnover of less than $2M and is eligible for the tax break. Company ABC purchases an asset costing $20,000. On the scheme prior to May 12, 2015 Company ABC would have been able to be depreciated at 15% per annum in the first year and then 30% per annum subsequently, meaning that the tax deduction in year one would be only $3,000, $5,100 in year two and reducing in each subsequent year.
Assuming a 30% company tax rate, the business owner would have saved only $900 in tax in year one, $1,530 in the next year and reducing thereafter.
With the instant asset write-off scheme, Company ABC will now be able to immediately deduct the full $20,000 of the asset, therefore will get a tax saving in year one of $6,000, being 30% of the $20,000. This leaves Company ABC an extra $5,100 better off in the first year.
Date and Time
Thu. 19 May 2016
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