After expanding the instant asset write-off scheme, in response to the COVID-19 pandemic on 12 March 2020, to include assets worth $150,000 (up from $30,000) and businesses with an aggregated turnover of less than $500 million (up from $50 million), the Federal Government has now extended the deadline for making claims from 1 July 2020 to 31 December 2020.
Instant Asset Write-Off Scheme
On 12 March 2020, the Australian Federal Government released an economic stimulus package in response to the worldwide coronavirus pandemic COVID-19, which included changes to the instant asset write off scheme that would last until 1 July 2020.
The instant asset write-off threshold was increased with immediate effect from $30,000 to $150,000 for businesses with an aggregated annual turnover of less than $500 million (up from $50 million), until 30 June 2020.
The instant asset write-off applies to new or second-hand assets first used or installed ready for use in this timeframe. The threshold also applies on a per asset basis, so eligible businesses can immediately write-off multiple assets, thereby providing cash flow benefits to these businesses.
On 9 June 2020, the Federal Treasurer announced that the current expansion of the instant asset write-off scheme, which was due to end on 1 July 2020, will be extended until 31 December 2020. All other conditions remain the same.
From 1 January 2021, onwards the asset threshold will revert to $1,000 and the instant write-off will only apply to small businesses with an aggregated turnover of less than $10 million.
The thresholds have changed over the last few years with the complete list available on the ATO website. Small businesses that choose to use the simplified depreciation rules, must use the instant asset write-off scheme on all eligible assets.
Exclusions and limits
The following assets are excluded from the instant asset write-off scheme:
- assets that are leased out, or expected to be leased out, for more than 50% of the time on a depreciating asset lease;
- assets allocated to a low-value assets pool;
- horticultural plants including grapevines;
- software allocated to a software development pool (but not other software); and
- assets eligible for capital works deductions.
In addition, if a car is purchased (a passenger vehicle, except a motor cycle or similar vehicle, designed to carry a load less than one tonne and fewer than nine passengers) for a business, the instant asset write-off is limited to the business portion of the car limit of $57,581 for the 2019–20 income tax year.
Businesses that have struggled to acquire and install eligible assets ready for use by 30 June 2020 will welcome the extended deadline. 31 December 2020 is still just over six months away however, therefore taxpayers should act quickly to source relevant depreciating assets, and have them first used or installed ready for use by the new deadline, especially assets with a delivery lead-time. Legislation will be introduced into Parliament to give effect to the changes, which are estimated to have a cost to revenue of $300 million over the forward estimates period.