The federal government has recently enhanced the instant asset write off scheme in response to the coronavirus outbreak which has disrupted the economy. It is now a crucial time for business owners to capitalise on the cash flow benefits available through this scheme as eligible assets under $150,000 can be claimed as an outright tax deduction presently. Accelerated depreciation is also available under certain criteria addressed below and sees 57.5% of the total value of the asset claimed in the year of purchase using the simplified depreciation rules.
The below table outlines the thresholds provided by the Australian Taxation Office. It is important to note that there are deadlines for specific periods which have a bearing on the amount available to be claimed during that period. The most recent change is the announcement of the government’s ‘Stimulus Package’ which is effective from the 12th of March 2020 and aims to assist businesses and the broader economy.
| Date range for when asset first used or installed ready for use | Threshold for eligible assets | Eligibility Criteria |
|---|---|---|
| 01/07/2020 to 30/06/2021 | N/A, Accelerated Depreciation applies | Aggregated turnover less than $500 million |
| 12/03/2020 to 30/06/2020 | $150,000 | Aggregated turnover less than $500 million |
| 7:30pm (AEDT) 02/04/2019 to 11/03/2020 | $30,000 | Aggregated turnover less than $50 million |
| 29/01/2019 to before 7.30pm (AEDT) 02/04/2019 | $25,000 | Aggregated turnover less than $10 million |
| 7.30pm (AEST) 12/05/2015 to 28/01/2019 | $20,000 | Aggregated turnover less than $10 million (From 1 July 2016) |
| 01/01/2014 to prior to 7.30pm (AEST) 12/05/2015 | $1,000 | Aggregated turnover less than $2 million |
| 01/07/2012 to 31/12/2013 | $6,500 | Aggregated turnover less than $2 million |
| 01/07/2011 to 30/06/2012 | $1,000 | Aggregated turnover less than $2 million |
Given the extensive range of deductions available, an emphasis is placed on accurate record keeping ensuring the claims are legitimate and thus avoiding any potential penalties. Business owners should also bear in mind the eligibility criteria above based on aggregated turnover which is the total amount of turnover earned from the primary business alongside any business connected with the owner or affiliated.
If the cost of the asset(s) is unknown, Quantity Surveyors can determine the value of your asset and guide you through the application in respect to the instant asset write-off scheme and above table. Such cases may include the transfer of assets from one person to another by way of sale where receipts are not provided, or even a sale of a business with plant and equipment. An example would be a business owner who purchases an existing café as a lump sum and a list of plant and equipment is provided but the value of these assets are not provided, the Tax Office will allow a Quantity Surveyor to determine the asset values for tax depreciation purposes.
The compilation of deductible assets is comprehensive and includes power tools, safety equipment, commercial ovens, office furniture etc. In the case where an asset does not qualify, it can be depreciated using the effective life prescribed by the ATO or determined by a Quantity Surveyor.
Capital works deductions cannot be claimed under this instant write-off scheme. Instead, any capital works expenses incurred such as mezzanine floors, glazing and benches can be recorded and depreciated under the prescribed 40-year ruling set by the ATO.
The enhanced instant asset write off scheme is set to expire on 30 June 2020. This leaves a small window for businesses to claim up to $150,000 in outright deductions and in the case the value exceeds $150,000 accelerated depreciation can apply. Business owners have until the 30th of June 2021 to utilise the write off where half the value is written off immediately and the remaining value is to be depreciated under normal asset depreciation rulings.
If a commercial property is owner-occupied, there are also allowances for the building and associated plant and equipment to be depreciated in conjunction to this scheme. Air conditioners, carpet and fire systems can be depreciated irrespective of the legislation changes in May 2017 which limits claims for residential properties held under an individual/joint ownership or self-managed superfunds/trusts. And if the property is in a shared or strata-titled premises, which may include items such as lifts, boom gates and security systems, these assets will also be entitled to the immediate write-off at a portion that is determined as per the strata plan.
Duo Tax Quantity Surveyors can provide the right guidance into isolating and identifying all assets to be claimed correctly in respect to the write-off scheme as previously we have assisted businesses in all industries such as childcares, hair salons and industrial manufacturing. These rulings may change so it’s best to stay in touch with our office or the ATO’s website to get more information about small business deduction eligibility.
Contact our experienced staff to receive an obligation free consultation where your prospective deductions can be determined and applied to your scenario.
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Tuan is an award winning Quantity Surveyor and leads Duo Tax Quantity Surveyors – Australia’s fastest growing provider of Tax Depreciation.
