Instant asset write-off policies have been expanded again as part of the Government’s COVID-19 initiative to encourage business spending to increase cash flow, stave off an economic recession, boost consumption and protect employment.
Last year, an increase in the instant asset write off allowed the writing off of the cost of purchasing an asset up to $150,000. In the November 2020 budget, the government extended this allowance even further.
There is now no limit to the amount a small business can write off under the instant asset write-off. This is now known as “temporary full expensing” and is available for any asset purchased between 7.30 pm AEDT 6 October 2020 to 30 June 2022.
It even applies to second-hand assets (where your turnover is under $50 million).
Businesses in a position to invest in equipment may be able to take advantage of the write-off and offset against their taxable income for the year and at the same time invest in improving business efficiency. Purchasing later in the tax year (June) as opposed to early in the new year (July) gives a benefit sooner in the tax savings that are made on that purchase.
Though writing off all of the assets this year may result in significant tax deductions, it may also mean that there are no tax deductions for depreciation available in future years. Upon the sale of any of these assets, this will be treated as taxable income, and tax will have to be paid on the sale value.