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Save Big with Instant Asset Write-Off!

Date: 16-05-2023

Instant Asset Write-Off - Alphaweld

As a business owner, it's essential to keep up with the latest changes in tax legislation that can potentially benefit your business. One such change is the instant asset write-off scheme, introduced by the Australian Government in 2011.

This scheme allows eligible businesses to deduct the full cost of assets purchased for their business. The scheme has since been expanded and increased in limit to provide significant tax savings for eligible businesses.

In this article, we will discuss the instant asset write-off scheme, who is eligible for it, the type of assets that are eligible, and the benefits it can offer for your business.

What is the instant asset write-off?

Eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used or installed ready for use.

Instant asset write-off can be used for:

• multiple assets if the cost of each individual asset is less than the relevant threshold
• new and second-hand assets.

Key benefits of instant asset write-off

• Write off the entire asset in one year – as opposed to writing off a proportion of each asset year by year.
• Decrease your taxable income and tax owing in the year the asset is purchased and installed.

Which types of businesses are eligible under this scheme?

Businesses are generally eligible if they have an aggregate turnover of less than $5 billion or a corporate tax entity that meets the alternative income test.

Is my business eligible?

If you answer yes to the following, you may be eligible for the instant asset write-off. 

• Is your aggregate turnover less than $5 billion annually?
• Will the equipment be installed and used in Australia?
• Will the asset be purchased and installed before 30 June 2023?

What assets are eligible for instant asset write-off?

Eligible assets are generally depreciating new assets first held, used or installed ready for use for taxable purpose between 7.30pm AEDT on 6 October 2020 and 30 June 2023 and costs of improvements incurred during that period.   

This includes:

• New or used machines and equipment
• Upgrades to existing machines and equipment

Small and medium businesses with an annual turnover of less than $50m may also claim an immediate tax deduction for the cost of eligible second-hand assets.   

Can a sole trader claim instant asset write-off?

Yes, a sole trader is eligible to claim immediate deduction provided the assets are eligible and the sole trader meets the eligible business criteria.

Need further advice?

If you’re hoping to take advantage of this tax incentive, we highly recommend seeking independent and professional tax advice to confirm your eligibility.

Find out more about eligibility, requirements and exclusions by visiting the ATO website.

Disclaimer: The information in this article is not intended as financial or investment advice and should not be construed or relied on as such. Before making any commitment of a financial nature you should seek advice from a qualified and registered financial or investment adviser.