End of Year Perks: The $20,000 Instant Asset Tax Write-Off for Small Businesses

By Geoff Scofield, Westlawn Finance MD & CEO
30 May 2018

It’s not often said that there are perks to the year ending and tax time approaching. For small business operators, this tax write-off is a must-know, as one of the ways to minimise tax liability.

If you’re a small business, and your aggregated turnover is less than $10 million: start writing a shopping list. A government scheme introduced in 2015 has been tweaked and extended over the past two years, so that all SMEs with up to $10 million turnover are eligible to write-off assets under $20,000. As the end of the financial year looms, this could mean a couple of things: assets you’ve acquired for business purposes over the last year can be deducted in your tax return. Or, if there are assets you’ve been saving up for and relegating to the “future” investments, this might be the time to treat yourself and your business.

Need a new welcoming couch for your important visitors? Or a refresh of the tools or technical equipment that keep the business ticking? This is a time to heed the saying, you’ve gotta spend money to make money. This scheme takes into account the need for small businesses to keep investing in their business in order to thrive and grow.

Just note that the assets need to be acquired, delivered and operational prior to June 30, and then the claim can be made in the financial year of 2017-18.

Looking to the Future:

Since 2015, the scheme has been valuable for many Australian small businesses. In the Federal Budget announced this month, the government declared another 12-month extension to the scheme — previously, it was due to shrink to a $1,000 write off by June 30, 2018; now SMEs have another year to take advantage. (Essentially, your small business could get the write off this year and another one next year with assets acquired, delivered and operational before June 30 in each year.)

This is the second extension so far — when the government first introduced it in 2015, it was available to businesses with an annual turnover of up to $2 million for 12 months. In 2017, the government extended the tax break to businesses with the higher annual revenue of up to $10 million.

Small Business Minister Michael McCormack said in 2017 that the extension “continues the government’s support for small businesses to pursue new ideas, invest in themselves and create more jobs.”

And if the Council of Small Business Australia and Australian Chamber of Commerce and Industry are successful, the extension may become a fixture. The COSBOA and Chamber have spearheaded a move to make it permanent,  declaring it an essential incentive for Australian businesses.

“This is an important policy to all small businesses and we believe it must continue going forward,” said the COSBOA submission to the government.

Read more about the evolution of the $20,000 instant asset tax write-off scheme here.

Assets you can shop for:

  • Assets that cost less than $20,000
  • Assets that are used for business purposes
  • ‘Physical’ assets – e.g. computers, phones, vehicles, tools
  • New or second-hand assets

Westlawn Tip: Westlawn can help you acquire these assets prior to June 30 by providing advice and an asset finance facility. This will give you access to loans that will allow you to contribute to your business growth and claim the important deduction. Speak to us to find out more.

Assets excluded:

  • Assets that cost more than $20,000
  • Assets that are used for personal purposes
  • Assets that are leased out (or expected to be leased out) for more than 50% of the time on a depreciating asset lease
  • Horticultural plants – e.g. grapevines
  • Software allocated to a software development pool
  • Capital works — e.g. building and structural improvements used to produce income

Article Sources:

Smart Company: 20,000 instant asset tax write-off explained

ATO: Applying the $20,000 instant asset write off

Smart Company: Put to make small business asset write off permanent

To find out how we can help your business, contact us today.

Call us on 1300 WESTLAWN (1300 937 852).

Copyright © 2018