How instant asset write-offs could help Aussie business get back on track

Eligible businesses may be able to take advantage of extended tax write-offs until the end of 2022. Here’s why it can help you get the equipment you need to thrive.

According to recent Westpac research, 58% of small-to-medium businesses are currently holding off on larger purchases as a result of the economic uncertainty caused by COVID-19. To help these businesses get the equipment they need to grow, the government has introduced a temporary full expensing incentive in addition to the extended instant asset write-off scheme. Here’s what you need to know about it, and how it can help your business get the equipment it needs to thrive.

The instant asset write-off and temporary full expensing measures

The government’s instant asset write-off allows eligible business owners to claim an instant tax deduction for eligible asset purchases. Depending on the size of your business, these can be new or second-hand, individual or multiple assets, so long as the cost of each individual purchase is less than the relevant threshold.

As part of the JobMaker Plan introduced in the 2020-21 Federal Budget earlier in October, the government announced an additional economy-boosting measure allowing a wider range of businesses to temporarily claim the full cost of capital on eligible assets. 

Who is eligible for these asset write-off options?

Businesses with an aggregated annual turnover of less than $5 billion are now able to write off the full cost of new eligible depreciating assets within the specified timeframe. Small-to-medium businesses with an annual turnover of less than $50 million are also able to claim a deduction for eligible second-hand assets. What’s more, if your business fits the bill, you can also claim the cost of improvements to eligible assets made during this time.

This marks a substantial increase to the instant asset write-off as we know it, which was already expanded from a $30,000 to $150,000 threshold on 24 March 2020 in response to the COVID-19 pandemic.

The original deadline of the instant asset-write off scheme has also been extended by six months, to 30 June 2021, to first use or install assets costing less than $150,000. Small to medium business with aggregated annual turnover between $50 million and $500 million can deduct for the full cost of eligible second-hand assets costing less than the above cost threshold if purchased by 31 December 2020 and installed by 30 June 2021.

However, if you’re planning on claiming an asset through the new temporary full expensing measures you’ve got a bit more time on your hands. In this case, your asset must be purchased, or installed and ready for use between 7:30pm AEDT on 6 October 2020 and 30 June 2022 to be eligible.

Financing your assets can help

If you’re hoping to take advantage of the instant asset write-off in time but need funding, financing might be an option.

Eligible goods loans issued as part of the Coronavirus SME Guarantee Scheme can now also be used as vehicle and equipment finance with loans of up to $1 million to help you acquire equipment, business vehicles and technology to help your business recover, adapt or grow. 

Under the Coronavirus SME Guarantee Scheme, eligible customers can get access to business loans of up to $1 million and lower interest rates from lenders as a result of the government support under the scheme. Under Phase 2, loan terms are available up to five years. On top of that, Westpac is offering no establishment fees on eligible loans that are settled by 30 June 2021.