$150k instant asset write-off set for significant drop

The $150,000 instant asset write-off will soon revert to its original threshold of $1,000 in just over four weeks, with businesses urged to consider the measure ahead of the end of financial year.

Announced in the first round of the government’s stimulus package in early March, the instant asset write-off threshold was increased by fivefold, rising from $30,000 to $150,000.

Access to the instant asset write-off was also expanded to businesses with an aggregated turnover of less than $500 million, 10 times more than the previous $50 million limit.

However, the increased and expanded measure will only run until 30 June 2020, before reverting to its legislated $1,000 threshold and reduced eligibility to small businesses with a turnover of less than $10 million.

While the write-off had been extended on a yearly basis in previous budgets, the postponement of this year’s budget to October has raised uncertainty over the future of the incentive.

There hasn’t been a lot of interest in this increased limit due to many businesses experiencing cash flow issues and a decrease in profits.

The decrease to $1000 may be worth considering bringing forward asset purchases to before 30th June as we doubt that the opportunity will be repeated. Even if you aren’t able to utilise all of the deduction in the current financial year it may assist in the 2021 year.

For businesses that do decide to utilise the instant asset write-off, the asset will need to be used or installed ready for use by 30 June 2020.

Often more expensive assets have a longer lead time between order and delivery/installation, so businesses that want to claim the deduction need to get their orders in. If they have an order made, they will need to watch the date of delivery - particularly with all of the COVID-19 global delivery and manufacturing issues.

For those who are considering purchasing a car, the ATO has reminded that the instant asset write-off will be limited to car limit of $57,581 for the 2019–20 income tax year, with the excess cost unable to be claimed under any other depreciation rules.

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