Federal Budget 2016: Too big for the $20,000 write-off? Not anymore.

3rd May, 2016

If your business was too large to claim the $20,000 instant asset write-off in last year’s Federal Budget, never fear – this year’s budget has given you an early Christmas present.

As part of the Government’s ’10 Year Enterprise Tax Plan’, the threshold of a ‘small business’ has now been changed. It used to apply to businesses with revenue under $2 million – now it has been extended to include businesses with a turnover of up to $10 million.

That means there are up to 90,000 businesses that can now access the $20,000 instant asset write-off that couldn’t before. So for just one financial year, between 1 July 2016 and 30 June 2017, businesses with up to $10 million in revenue can now write off asset purchases of up to $20,000 immediately.

This is a huge win for small businesses, where cash flow is the main concern. By bringing forward deductions you’re able to claim your expense in one lump sum rather than depreciate it over several years.

So – what can I buy?

Good question. We need to be crystal clear about what type of assets businesses can buy.

The write-off applies to depreciating assets. That is, an asset that has a limited amount of use. Vehicles, office furniture and computer hardware are all depreciating assets. Things like land and trading stock are not.

Could you clarify?

Sure. Here are some examples of things you can buy:

  • IT hardware. New computers, printers, scanners, servers
  • Office or shop furniture, like for fitting out a café or a restaurant
  • Work vehicles
  • Tools and machinery
  • Plant and equipment

What’s the catch?

Any asset you buy and write off has to be first used, or installed and ready for use, by 30 June 2017.

And remember, this doesn’t apply to the current financial year, so don’t rush out just yet to buy equipment. The increased threshold for small businesses to $10 million doesn’t apply until 1 July 2016.

So hold your horses for a couple of months. (But definitely start planning.)

What else do I need to know?

This isn’t a rebate or a refund. The instant write-off is simply bringing forward the depreciation you would have claimed anyway over several years.

But for many small businesses which missed out on the asset write-off last year, this is a huge win. Been planning to buy some equipment, or need to upgrade hardware? Doing so in the next financial year and claiming the cost immediately is going to bring your business a huge tax benefit.

Extending the instant asset write-off to more businesses isn’t just a great tax incentive – it’s helping small businesses succeed.

For advice specific to your business, speak to your accountant or advisor.