12th March 2019

    AUTHOR: Carl Valentine
    This is a perfect example of decent policy that is designed to assist, rather than hinder, small business operators.

    The Federal Government’s Instant Asset Write-Off is without a doubt one of the most relevant and popular small business tax benefits.

    Just recently I was talking to a client about the initiative and how they could utilise it to help their business endeavours. Perhaps serendipitously, they were looking to buy a piece of equipment with a purchase price of $25,000.

    It is welcome news that the government has announced plans to increase the Instant Asset Write-Off threshold by $5,000, from $20,000 to $25,000, while also extending the policy until 30 June 2020.

    This is a perfect example of decent policy that is designed to assist, rather than hinder, small business operators.

    Small business is the engine room of our economy, representing 99 per cent of all businesses in Australia. Government needs to enable growth opportunities and this initiative certainly achieves that.

    The policy allows eligible small business owners to purchase a new or second-hand asset, such as a vehicle, printer, factory machinery or in my client’s case, generator maintenance equipment. Assets purchased under the new $25,000 threshold could be used as an immediate tax deduction (rather than depreciating it over a longer period), and there is no limit to the number of assets that can be claimed.

    By claiming the deduction in one hit, it allows for a significant reduction in the overall tax bill for that year. A small business operator who has been considering purchasing a new asset should consider doing so before June 30 to ensure best benefit in this current financial year. They do also have the option of deferring the purchase until the 2020 financial year.

    It is important to remember the policy is a tax deduction, not a rebate or offset. That means small business operators need to have sufficient cash flow or financing arrangement to fund the purchase of the asset.

    As with any government initiative, there are rules:

    • The purchase must be relevant to the business. A landscaper who purchases two flat screen televisions would likely not get the deduction;
    • Assets must be ready to use in the financial year the deduction was claimed;
    • For those assets which are for business and personal use, only the business use percentage of the asset can be claimed as a deduction;
    • There are some assets which can’t be claimed. They include horticultural plants and building construction costs.

    Overall, the announcement by the Federal Government that it intends to increase the Instant Asset Write-Off for small business and extend the lifetime of the policy is welcome news for small business operators.

    It would be great to see more policies like this that support the small business sector to get on with the business of doing business.

    The legislative change to increase the Instant Asset Write-Off threshold was introduced to the Australian Parliament on the 13th of February 2019.




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