SMALL BUSINESS INSTANT INSTRUMENTATION ASSET TAX WRITE-OFF SCHEME

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).

For Example:  

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.
 

For more information about small business concessions and whether you are eligible for the Instant Asset Tax Write-Off Scheme, visit the Australian Taxation Office

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