On 12 September 2018, the Senate passed the Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Bill 2018. This Bill amends the Income Tax Assessment Act 1997 to extend the $20,000 instant asset write-off (as part of the broader suite of accelerated depreciation rules) by a further 12 months to 30 June 2019.
The decision to extend the instant asset write-off was announced in the 2018-19 Federal Budget.
The instant asset write-off is a simplified depreciation rule provided to businesses with an aggregated annual turnover (post budget announcement) of less than $10 million. If the business purchases an asset that costs less than $20,000 it can choose to immediately deduct the value of the asset in the year it was purchased.
However, the write-off is only available for the ‘taxable purpose proportion’ of the cost of the asset. The taxable purpose proportion of a depreciating asset represents the proportion of an asset’s use in an income year that is for the purposes of producing assessable income.
Broadly, the cost of the asset is what you have paid for it, including any GST paid if you are not registered for GST, and additional amounts spent on transporting, installing and improving the asset. For motor vehicles, amounts paid for CTP, registration and extended warranty are not included in the asset’s cost.
The instant asset write-off applies on a ‘per asset basis’. This means that there is no limit on how many times a business can apply the instant asset write-off in a year. For example, if a business buys four cars to be used entirely for business purposes at a cost $18,000 per car, they may choose to deduct the entire cost of each car in that income year.
The instant asset write-off was initially available to businesses in respect of assets that cost $1,000 or less. In the 2015-16 Federal Budget this threshold was raised to $20,000, but was to revert to $1,000 on 30 June 2017. The $20,000 threshold was then extended to 30 June 2018 and now we’ve seen a further proposed extension to 30 June 2019, but unfortunately it has not yet been made permanent.