30K Instant Tax Write-off: How does the increase work?

April 2nd 2019 was the day that both houses of parliament approved the federal bill to allow a 30K Instant Tax Write-off, an increase of $5K on what was currently available. This increase was effective immediately. A reason for rejoicing across Australia's SME landscape? Well, yes, but also no. The change in the threshold is only a temporary one, and will only be available until June 30th, 2020. The news may also be surprising to business owners, given that the level was increased from $20K to $25K only a few months before, back in January 2019.

The new $30,000 limit is great news for business and the economy; however, it is not the permanent fix many hoped for. Regardless of who is in power after the next election, this limit will be terminated at the end of June next year.
So what does this mean for businesses?

Well, time is limited, but you do have a year to get your asset write-off submitted, so there's no need to panic. If you want to get your asset written off this fiscal year, you will need to act quickly however. Any asset purchases you may want to write off should be made without delay, and not left on the back burner.

According to the government, more than 350,000 businesses have already taken this advice and made their move, accessing the write-off within its first month of availability. The threshold of businesses who can claim has also been raised, and now businesses with a revenue of up to $50m are eligible.

Prime Minister Scott Morrison says that this covers 'an additional 22,000 businesses' and a further 1.7 million employees.

But how exactly does the write-off work?

Let's take a look.

● The whole cost of the asset that a business wants to purchase should be below the Instant Asset Write-Off threshold. This does not include any discount you may have received as a result of a trade-in, as only the full value is taken into account.
● If you plan to use the asset for private use as well as business use, you must subtract the amount that is for private use from the asset value. The remaining value can be claimed as an instant write-off.
● However, even though only the taxable (business use) portion of the asset value can be written off, the entire cost of the asset must still be within the threshold.
● If you then decide to sell the asset that you claimed for as part of the Instant Asset Write-off scheme, you must include any taxable income you received from the sale in your assessable income at the end of the relevant tax period.

What happens if I exceed the threshold?

Let's say you purchase a vehicle for your qualifying business. The vehicle you purchase is worth $35,000 and was purchased within the tax period before the last one. You work out that your vehicle will be utilised for business purposes only 25% of the time, which means only $8,750 of the purchase price can be written off.

However, you do not qualify for the immediate write-off because the total value of the vehicle exceeds the $30,000 threshold. Instead, the taxable portion of the asset is added to your business' returns at the end of the tax phase.

Want to learn more about the 30K Instant Asset Write-off? Your accountant is a good person to talk to, as they will be able to help you strategise in the best way possible. If you want to access the capital needed to take full advantage of the 30k asset write-off before the end of the current financial year? Get in touch with the team here at Banjo Loans today.

Written by Guy Callaghan, CEO of Banjo Loans

Last Updated: 07 October 2022

Published: 20 May 2019