3rd August, 2020

Instant Asset Write-off: Is 2020 the year to invest in ERP?

Have you been putting off an upgrade to enterprise resource planning software? With the Instant Asset Write-off available to much larger businesses than ever before, now may be your moment to embrace ERP.

The Federal Government has responded to the unique challenges caused by COVID-19 to provide targeted stimulus to Australian businesses, primarily in the form of wage subsidies. But it’s also revamped a popular small business tax break – the Instant Asset Write-off.

From 12 March to 31 December 2020 inclusive, the Instant Asset Write-off threshold for each asset increased to $150,000 (up from $30,000) for business entities with aggregated annual turnover of less than $500 million (up from $50 million).

By opening the Instant Asset Write-off to a broader section of the business community, much larger businesses are able to benefit from this deduction and invest with more confidence.

And beyond the sorts of things you might usually consider as a deductible asset, larger businesses should also keep in mind the costs of upgrading their IT infrastructure. As a prime example, many companies considering a move to an enterprise resource planning (ERP) solution may find that 2020 is just the right time to do so.

New turnover thresholds by eligible business size:

Note: For eligible businesses with an aggregated turnover from $10 million to less than $500 million, the $150,000 threshold applies for assets purchased from 7.30pm (AEDT) on 2 April 2019 but not first used or installed ready for use until 12 March 2020 to 31 December 2020.

Eligibility for bigger businesses

Both new and secondhand assets can be claimed, as long as each asset costs less than $150,000 and they must be first used or installed ready for use between 12 March and 31 December 2020.

You should also note that, if the purchased asset is for business and private use, only the business portion can be claimed.

You can find out more details regarding your business’s eligibility here.

What you can and can’t claim

For many companies, the economic downturn represents both challenges and opportunities. While an immediate fall in client activity may mean a temporary decline in revenue, it also creates the perfect environment for testing and building out systems and processes.

That means it could pay dividends to perform an audit of all assets purchased this year, as well as those on the agenda – there’s a chance they’ll be eligible for you to claim against. This may also allow you to make some investment decisions you may not have otherwise.

But, there are some asset types that are excluded as follows:

1. Assets that are leased out, or expected to be leased out, for more than 50% of the time on a depreciating asset lease
2. Assets you allocated to a low-value assets (pool) before using the simplified depreciation rules
3. Horticultural plants including grapevines
4. Software allocated to a software development pool (but not other software)
5. Capital works deductions

In the current environment, the ability to support your business’s ability to sustain itself and grow into the future is a day-to-day concern. And that means seeking cost efficiencies in every way possible – even more reason to make sure you don’t miss out on the Instant Asset Write-off this year.

Disclaimer: This does not constitute tax advice and should not be relied on without seeking independent advice from your tax agent or tax advisor.