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

4-minute read

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.

Key take-outs
  • Vehicle and equipment finance can help you purchase business assets and your eligible purchases may qualify for the instant asset write-off
  • Under the government’s JobMaker Plan, businesses with an aggregated annual turnover of less than $5 billion could be eligible to claim an immediate tax deduction for the purchase price of eligible new assets. The assets must be first used or installed by 30 June 2022
  • Small and medium businesses with an annual turnover of less than $50 million may also be able to deduct eligible second-hand assets and improvements

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.

 

We have a range of vehicle and equipment financing solutions that may suit your business needs. 

 

It’s been a challenging 2020, but taking advantage of support measures available to you might give you the best chance to access flow of credit to help your business grow, recover, adapt to what’s to come.

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Things you should know

This article is a general overview and should be used as a guide only. We recommend that you seek independent professional advice about your specific circumstances before acting.