The Instant Asset Write-Off threshold has been increased to $20,000 for the 2023-24 financial year, offering significant cash flow benefits for small businesses. Here’s how you can make the most of it:
Key Benefits
The increase allows your business to claim an immediate tax deduction for assets costing less than $20,000 in the year of purchase. This can greatly improve your cash flow by reducing your taxable income. However, remember that this deduction is not a direct refund; it simply lowers your taxable income. For companies, the benefit is tied to the applicable company tax rate, which is 25% for base rate entities and 30% for others.
Eligibility Criteria
To qualify for the instant asset write-off, your business must:
- Operate under general business principles during the 2024 income year.
- Have an aggregated turnover of less than $10 million in the 2024 or 2023 income year.
- Opt into the simplified depreciation rules for the 2024 income year.
Asset Requirements
For an asset to be eligible:
- It must be depreciable, excluding items like horticultural plants or capital works.
- The cost must be under $20,000 (after GST for GST-registered businesses).
- The asset must be used or ready for use between 1 July 2023 and 30 June 2024.
Handling Assets Over $20,000
If an asset exceeds the $20,000 threshold, it can still be depreciated, but at a rate of 15% in the first year and 30% in subsequent years under the small business general pool. Additionally, if your pool balance is below $20,000, you can write off the entire pool balance in the 2024 income year.
Multiple Assets and Second-Hand Goods
The $20,000 threshold applies per asset, so you can claim an immediate deduction for multiple assets if they each cost under $20,000. Both new and second-hand assets are eligible, provided they meet the other criteria.
Extension to 2025
The government has proposed extending the increased threshold to 30 June 2025, with a Bill currently before Parliament to enact this change. This extension would allow continued access to these benefits for another year.
The Instant Asset Write-Off is a powerful tool for managing your business’s tax obligations and improving cash flow. However, it’s important to keep track of eligibility requirements and ensure that assets meet all necessary conditions before making a claim. If you need help navigating these rules, our team at Business Edge Advisors is here to provide expert guidance tailored to your business needs.
