News
Small businesses: claim your $20,000 instant asset write-off
Have you purchased or upgraded a business asset? You may be able to deduct the full cost of eligible assets.
2023 - 24
The government announced as part of the federal budget 2023–24 in May 2023, that it would temporarily increase the small business instant asset write-off (IAWO) threshold to $20,000 for 2023–24. The legislative process had taken more then 12 months to work through, with the Bill finally passed in its original form and enacted on 28 June 2024.
What does this mean for you?
Eligible businesses can claim the IAWO for eligible new or second-hand assets that were first used or installed ready for use from 1 July 2023 to 30 June 2024 and which cost less than $20,000. Some exclusions and limits apply.
The $20,000 threshold applies on a per-asset basis, so eligible entities can immediately deduct the cost of multiple identical or similar assets. You can only claim the business portion of the expense, and you must have records to prove it.
Importantly, to be eligible for the IAWO, an asset must be first used or installed ready for use for a taxable purpose during 2023–24. It is not sufficient that you paid for the asset in part or in full, issued an invoice, entered into a contract or placed an order where the asset is not delivered until July 2024 or later. This will need to be proven if questioned by the ATO.
In addition to the IAWO, you may be eligible to claim a bonus deduction under the small business energy incentive, for the same assets in the 2023-24 income year. You may also be eligible to claim a bonus deduction for expenditure you have incurred for providing training to one or more of your employees under the small business skills and training boost.
2024–25
The $20,000 threshold for businesses with an aggregated turnover of less than $10 million will be extended by 12 months to 30 June 2025.
The extended IAWO will apply to eligible assets first used or installed ready for use for a taxable purpose by 30 June 2025. Without this change, the threshold would have reverted to the legislated threshold of $1,000 from 1 July 2024.
Tax implications of disposing of or selling a fully expensed asset
Small businesses benefit from immediately deducting the cost of eligible assets under the IAWO but there are tax implications of disposing of or selling an asset whose cost was fully deducted under the IAWO.
There are also scenarios where the taxable purpose proportion (TPP) of the asset changes depending on private use of the asset. This is most likely to occur where a small business is a sole trader.
Get in touch
If you’d like to discuss any of the above, get in touch and let TaxAssist Accountants help you plan effectively to minimise your tax liabilities. Call us today on 02 9608 3707 or use our online enquiry form.
Date published 19 Jul 2024 | Last updated 19 Jul 2024
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