Stimulating investment is high on the Government’s agenda. To encourage spending, the 2020-21 Budget introduced a measure that allows businesses with turnover under $5bn an immediate deduction for depreciable assets and the cost of improvements to existing assets in the first year of use. This means that an asset’s cost will be fully deductible in the year it’s installed ready for use, rather than being claimed over the asset’s life. And, there is no cap on the cost of the asset.
When it comes to second-hand assets the rules are a bit different depending on the size of the business. Businesses with an aggregated turnover under $50 million can claim an immediate deduction for the cost of second-hand assets under the new measures.
Businesses with aggregated annual turnover between $50 million and $500 million can still deduct the full cost of eligible second-hand assets costing less than $150,000 that are purchased by 31 December 2020 under the existing enhanced instant asset write-off. Businesses that hold assets eligible for the enhanced $150,000 instant asset write-off will have an extra six months, until 30 June 2021, to first use or install those assets.
For small business entities that have assets in a general pool the changes seek to ensure that pool balances are completely written-off for tax purposes in the 2021 and 2022 income years.
These super-charged immediate deduction for depreciable assets rules tie into the existing instant asset write-off for businesses with a turnover under $500 million (summarised below).
The instant asset write-off only applies to certain depreciable assets. There are some assets, like horticultural plants, capital works (building construction costs, etc.) and certain intangible assets that don’t qualify for the new rules.
| Instant asset write-off thresholds | Aggregated turnover under $10m | Aggregated turnover under $50m | Aggregated turnover under $500m | Aggregated turnover under $5bn |
| 1 July 2018 – 28 January 2019 | $20,000 | – | – | – |
| 29 January 2020 – 2 April 2020 | $25,000 | – | – | – |
| 2 April 2020 – 11 March 2020 | $30,000 | $30,000 | – | – |
| 12 March 2020 – 31 December 2020 | $150,000 | $150,000 | $150,000 | – |
| 6 October 2020 – 30 June 2022 | unlimited | unlimited | unlimited | Unlimited |
Further help:
The 2020-21 Budget delivered a range of incentives for business to invest. If you would like us to review your position and the tax impact of any investments you are contemplating, please call us and we can assist you to get the best possible outcome. You can reach us on (07) 3023 4800 or at mail@marshpartners.com.au.
You can find out more about working with Marsh & Partners here. As your Absolute.Account.Ability partner we’re on a mission to make your business life better. We’ll help you set goals for your business, devise an Action Plan to make them happen and meet with you regularly to ensure you stay on track.
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