Coronavirus (COVID-19) updates from the Australian Government

Your assets and purchases

False

Whether it be purchasing new equipment for your warehouse or a second hand tractor, your business may benefit from the increased and expanded instant asset write-off.

The threshold has temporarily increased from $30,000 to $150,000 and expanded access to include all businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020.

When

Available from March 2020 for new or second-hand assets first used or installed ready for use by 30 June 2020.

On 9 June 2020, the Government announced a six month extension to the Instant Asset Write-Off to 31 December 2020.

Case study

Business benefits from increased asset threshold

Owen owns a company, ON Point Farms Pty Ltd, through which he operates a farming business in the Central Wheat Belt of Western Australia. ON Point Farms Pty Ltd has an aggregated annual turnover of $25 million for the 2019-20 income year. On 1 May 2020, Owen purchases a second hand tractor for $140,000, exclusive of GST, for use in his business.

Under existing tax arrangements, ON Point Farms Pty Ltd is not able to immediately deduct assets costing more than $30,000 and instead would depreciate the tractor using an effective life of 12 years. Choosing to use the diminishing value method, ON Point Farms Pty Ltd would claim a tax deduction of $3,899 for the 2019-20 income year.

Under the new $150,000 instant asset write-off, ON Point Farms Pty Ltd would instead claim an immediate deduction of $140,000 for the purchase of the tractor in the 2019-20 income year, $136,101 more than under existing arrangements. At the company tax rate of 27.5 per cent, Owen will pay $37,427.78 less tax in 2019-20.

This will improve ON Point Farms Pty Ltd’s cash flow and help his business withstand and recover from the economic impact of the coronavirus.

Fact sheet

PDF file

See also