Instant Asset Write-Off Update – What You Need to Know Now

The recent Budget announcement is good news for small business owners. The Instant Asset Write-Off program has been extended for another year, allowing eligible businesses to save money on their taxes.

What is the instant asset write-off?

Imagine buying a new computer for your business. Typically, you wouldn't be able to deduct the entire cost immediately from your taxes. Instead, you would spread that cost (called depreciation) over several years.

The Instant Asset Write-Off program allows eligible businesses to claim the full cost of qualifying assets, costing under $20,000, as an immediate tax deduction. This can significantly reduce your taxable income and save you money on taxes.

Who qualifies?

Here's the breakdown of who can take advantage of this program:

• Small businesses: Your business must have an annual turnover (total sales revenue) of less than $10 million to be eligible.
• Affordable assets: The asset you're purchasing must cost less than $20,000 (this is per asset, so you can write off multiple items under $20,000).
• Timing: The asset must be first used or installed for business purposes between 1 July 2023 and 30 June 2025.
• New or used: The program applies to both brand new and second-hand assets.

What if your asset costs more than $20,000?

No worries. Even if your asset doesn't meet the instant write-off threshold, you can still claim depreciation on it.

This means you'll deduct a portion of the cost from your taxes each year over a set period. For small businesses, the depreciation rate is 15% in the first year and 30% in subsequent years.

Are there any exceptions?

There are a few things to keep in mind:

• Large businesses: Companies with an annual turnover of $500 million or more are not eligible for the instant asset write-off.
• Temporary full expensing: There's another tax measure called temporary full expensing that applies to some assets acquired before 1 July 2023. If your asset falls under this category, you can't use the instant asset write-off instead.

What's the current status?

The Instant Asset Write-Off extension is still making its way through the legislative process. While the $20,000 threshold is expected to pass, the Senate recently proposed raising it to $30,000. We're waiting to see what the final decision will be.

Unsure if you qualify?

Unsure if your business qualifies or if the Instant Asset Write-Off aligns with your goals? Consulting with a professional is always recommended.

At Clarity Taxation, we specialise in small business accounting and can help you:

• Confirm eligibility: We'll ensure your business meets all the program requirements.
• Optimise tax savings: Our team can help you identify other potential deductions and strategies to minimise your tax burden.
• Navigate the Program: We'll guide you through the Instant Asset Write-Off process to ensure everything is done correctly.