Time running out to make the most of asset write-offs

Time running out to make the most of asset write-offs

THIS is your last chance to take advantage of the Federal Government’s $20,000 instant asset write-off for small business.

Introduced in May 2015, it is set to end on June 30 and will fall to $1000 from July 1.

The scheme allows small business to immediately deduct most depreciable new or second-hand assets from their tax return if they cost less than $20,000.

To qualify, a business must have an annual turnover less than $10 million and the asset must have been bought and used, or installed ready for use, in the income year it is being claimed.

It is possible to use the write-off multiple times in the same financial year as long as each asset costs less than $20,000.

The scheme has a number of conditions and it is wise to seek professional advice when looking to claim an asset.

The total cost of the asset must be less than the $20,000 threshold, regardless of any trade-in amount.

For example, if an electrician buys a new van for $30,000, receiving a trade-in of $12,000 for the old van, even though they are only $18,000 out of pocket, the car cannot be claimed under the instant asset write-off.

Even if the portion of the asset used for business is less than the threshold, it can be claimed only if the total cost of the asset is less than $20,000.

If the electrician in the example uses his new van for business purposes 50 per cent of the time, although its value to the business is $15,000 ($30,000 x 50 per cent), it cannot be claimed under the instant tax-write off.

The application of the write-off can also get complicated when it comes to GST.

If a business is not registered for GST, the GST is included in the total cost of the asset.

Businesses registered for GST exclude the GST paid on the asset.

The write-off does not mean business owners will get cash back from the ATO right away.

It just reduces their taxable income and the tax paid in the relevant year.