On Tuesday 11 May 2021, Treasurer Josh Frydenberg announced that eligible businesses can now make much-needed investments and write off the depreciation until June 30, 2023.
The scheme aims to bring forward spending on new assets from businesses by allowing them to reduce the amount of tax they pay by claim the full tax deduction upfront.
Coupled with the extension of the 'loss carry back' scheme, the Treasury estimates the two measures will boost GDP by around $2.5 billion in 2020-21, $7.5 billion in 2021-22, and $8 billion in 2022-23, and create around 60,000 jobs by the end of 2022-23.
How does the instant asset write-off benefit businesses?
The instant asset write-off allows small businesses to claim immediate deductions (up to a limited amount) for new or second-hand plant and equipment asset purchases such as laptops, tools and office equipment.
Under instant asset write-off, eligible businesses can:
- immediately write off the cost of each asset that costs less than the relevant threshold amount.
- claim a tax deduction for the business portion of the cost in the year the asset is first used or installed ready for use.
What is covered by the instant asset write-off?
The Australian Taxation Office states that the extension of the instant asset write-off scheme allows a deduction for:
- the business portion of the cost of new eligible depreciating assets for businesses with an aggregated turnover under $5 billion or for corporate tx entities that satisfy the alternative test.
- the business portion of the cost of eligible second-hand assets for businesses with an aggregated turnover under $50 million.
- the balance of a small business pool at the end of each income year in this period for businesses with an aggregated turnover under $10 million.
Who is eligible for the instant asset write-off scheme?
Eligibility to use instant asset write-off on an asset depends on:
- your aggregated turnover
- the date you purchased the asset
- when it was first used or installed ready for use
- the cost of the asset being less than the threshold.
For more information on the scheme visit the Australian Tax Office website.
Our recommendations
If your business falls within this threshold, we strongly recommend you talk to your accountant about how you can leverage the instant asset write-off scheme before 30 June 2023. Eligible assets can include PCs, Servers, Phone Systems or any other hardware you may require to keep your business running smoothly.
As a general guide, we typically recommend that Diamond IT customers have a spare of all critical equipment (such as a spare laptop/PC/switch) on hand. With the current stock shortages already impacting the market, we recommend 'taking your place in the queue' as soon as possible.
Our Business Technology Managers (BTMs) and Technology Consulting team are specialists in improving your IT infrastructure. Contact our team on 1300 307 907 today.
