News
With businesses of all sizes looking to find additional methods of bolstering their bottom line and maximise tax savings, it’s important to stay on top of changes to legislation and ATO policies. With that in mind, we're diving into the reinstatement of the $20,000 instant asset write-off threshold and what it means for SMEs across the country.
Introduced by the Australian government in 2015, the $20,000 instant asset write-off has been somewhat of a lifeline for SMEs, allowing them to invest in their businesses and drive economic growth. Although the temporary full expensing rules, offering an immediate deduction for the full cost of assets acquired, ended on June 30, 2023, the government has taken steps to ensure continued support for SMEs.
The instant asset write-off threshold was set to revert to $1,000 from July 1, 2023. However, the government has introduced a Bill to Parliament to maintain the $20,000 threshold for small business entities for the 2024 income year. This move aims to provide stability and encourage business investment.
The ability to claim the cost of an asset up to $20,000 is a huge help to many when it comes to encouraging growth and well worth understanding fully, so let’s jump into the details …
For SMEs to access the $20,000 instant asset write-off, they must meet specific criteria:
• The entity must be conducting a business under general principles in the 2024 income year.
• Aggregated annual turnover should be less than $10 million, based on either current or previous year figures.
• The entity must opt to apply the simplified depreciation rules for the 2024 income year.
• The asset's cost must be less than $20,000.
• The asset must be first used or installed ready for use for a taxable purpose between July 1, 2023, and June 30, 2024.
It's crucial to note that SMEs must opt-in to the simplified depreciation rules to access the instant asset write-off. Failure to do so will result in ineligibility, regardless of meeting other conditions. You can read the ATO’s breakdown of these rules here.
The $20,000 threshold applies per asset, enabling SMEs to potentially deduct the full cost of multiple assets throughout the 2024 year, as long as each asset's cost remains below $20,000. Additionally, the threshold determines whether the full pool balance is written off for the 2024 income year, offering further opportunities for tax benefits.
Provisions preventing SMEs from re-entering the simplified depreciation regime for five years, if they opt-out, will remain suspended until June 30, 2024. This flexibility provides SMEs with more control over their depreciation strategies.
For details and help assessing your depreciation strategies, get in touch with the Attune Advisory team so we can help ensure you’re setting yourself up correctly.
Assets eligible for the instant asset write-off must fall within the scope of depreciation provisions. Expenditure on capital improvements to buildings, governed by capital works rules, does not qualify. Assets costing $20,000 or more can still be placed into the small business general pool and depreciated at 15% in the first income year and 30% each subsequent year.
Once again, before jumping into an asset purchase for your business, it’s worth discussing the details with the Attune team to ensure we can guide you to the most appropriate course of action when it comes to the tax treatment of the asset for your business.
The reinstatement of the $20,000 instant asset write-off threshold presents SMEs with valuable opportunities to invest in their businesses while enjoying tax benefits. At Attune Advisory, we're here to support you in navigating these changes and maximising your financial outcomes. Reach out to our team via email or call us on 1300 866 113 to explore how you can leverage these incentives to drive growth and success for your business.
We’re here to give you tailored advice that works for your business and financial strategies for success.
