Small businesses in Mt Gambier, Warrnambool, Colac, Camperdown and Hamilton looking to purchase assets before the end of the financial year to claim the COVID-19-instigated $150k asset write off have been given a six month extension.
After expanding the asset-write off scheme in March 2020, from assets worth $30,000 to $150,000, the Federal Government this week extended the deadline for making claims, from July 1 2020 to December 31 2020.
Until the Government’s announcement on Tuesday 9 June, the $150,000 write-off was due to expire at the end of June 2020.
So, what does this mean for businesses?
You can immediately deduct the value of an asset, rather than spread deductions over several years
This scheme brings forward tax deductions for eligible spending, rather than stretching it out over four years; the idea is to ensure businesses have greater cash flow, that they can then invest in their own business, and the local economy.
What about an asset I use for both work and personal use?
If you buy an asset for your business that you also use personally, you can only write-off the percentage you use for work.
For example, if you purchased a $50,000 twin cab ute for your business, that 80% of the time was used for business purposes, and 20% of the time was being used for personal purposes, you would only be eligible to write off $40,000 (the 80% of the total asset cost).
The $150k threshold is PER ASSET – not total cost of the assets
The write-off applies to each asset you purchase that is up to $150k each. So, you can acquire multiple different assets, and still fully depreciate. For example, you can purchase a tractor for $140k and a truck for $120k – both will qualify, and result in an immediate write-off of $260k.
The deduction will apply once the equipment is ready for use
The extension will also give businesses additional time to acquire and install assets up until 31 December 2020 – so there won’t necessarily be a rush on getting equipment installed in the next three weeks.
It applies to new AND second-hand equipment
It’s not just about brand new equipment or assets. The write-off applies to second-hand purchases as well.
There are conditions on what assets are covered
For example, the ATO will exclude assets that are leased out, or expected to be leased out for more than 50% of the time of the depreciating asset lease. You also can’t claim horticultural plants (including grapevines) or capital works deductions.
Speaking with an Accountant or Business Advisor before you make a purchase is the best way to ensure your investment fits the criteria.
The Government wants this to inspire businesses to spend now, not later
The Federal Treasurer said when he announced the extension that the extension was designed to encourage businesses to, “(stick) with investment they had planned”, and bring spending forward into the short term.
At this stage, from 1 January 2021, it will go back to what it was
From 1 January 2021, the scheme will revert back to only being available for small businesses with an aggregated turnover of less than $10 million, and the threshold will be just $1,000. Now’s the time to act if you can.
We can help if you still have questions
Wondering how your business can make the most of this write-off extension? Contact Sinclair Wilson’s Business Advisors. We’re here to help.
