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The 2020 $150,000 Instant Asset Write-Off Explained

The government recently announced a modified instant asset tax write-off. The scheme allows you to update workshop equipment and purchase new tools, from a fitted out company vehicle to welding equipment and accessories.

What are the recent modifications to the instant asset write-off?

The instant asset tax write-off is a way for eligible businesses to write off the cost of assets that separately cost less than the threshold. It lets you claim tax deductions on new and second-hand assets you purchase for business. The write-off was $30,000 last year, howerver COVID-19 has compelled the government to make changes.

To keep the economy moving with many incentives being introduced one of them is that the current government has raised the Instant Asset Write Off scheme to $150,000. Australian businesses can now write off tax on single assets purchased between 12 March and 30 June 2020 costing up to $150,000. This policy also applies to multiple assets purchased, as long as the total is below $150,000.

Eligible businesses for the recently modified instant asset write-off include those with an aggregated turnover of less than $500 million. This is a big difference from the previous $50 million turnover.

The temporary increase in the write-off is critical for businesses that need to make large, essential purchases. It’s especially helpful while the government tries to stimulate the economy that is easing out of the COVID-19 pandemic.

What are the benefits of the $150,000 instant asset write-off?

The newly implemented instant asset tax write-off is a direct response to the economic damage of the coronavirus situation. Your business can benefit from it in two ways.

First is the increased asset threshold. You can claim an immediate deduction for any asset purchased below $150,000. This will automatically reflect in your tax for the 2019-20 income year.

Second, you can benefit from the new write-off’s increased turnover threshold.

For example, you make a one-time purchase of 20 new machines worth $10,000 each. You can still claim an immediate deduction of $150,000 in the 2019-20 income year because although you bought multiple items, each one is worth less than the $150,000 threshold for individual assets.

Is it a good time to invest in assets now?

Given the fivefold increase in the threshold for an instant write-off, it’s worth looking into. Review your budget and check your cash flow to make sure it supports your planned purchases. The assets also have to be operational within this year to qualify for the write-off.

For example, if you’re planning to purchase a new machine to replace old equipment or to expand your operations by the end of the year. If the purchase is part of your annual budget and you have a steady cash flow, then adjust your timetable to purchase it sooner and make the most of the $150,000 write-off.

Alphaweld is a single-source partner for high-quality welding equipment. Established in 2006, we simplify the way you source your requirements, which is why we are a leader among welding equipment suppliers in Australia.

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