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How to Benefit from the Asset Write-Off Extension For Small Businesses

Propel Business Group is excited to share with our clients that the Australian Government has announced that the instant asset write-off scheme introduced to bring forward spending amongst the 2020 pandemic will be extended for 12 months, until June 2022.

What does this mean for Australian SMEs?

For Australian small businesses, this means that it is the perfect time to upgrade your assets. The entire value of the assets you purchase can be written off in the same financial year that you bought them. This will encourage small businesses to spend, stimulating the economy.

As put by Federal Treasurer Josh Frydenberg when announcing the 2021-22 Budget, the extension of the asset write off scheme for another means, “…a tradie can buy a new ute, a farmer a new harvester and a manufacturer can expand their production line.” 1

Who is eligible?

Nearly 99% of the businesses in Australia are eligible to take advantage of the extension of the asset write off scheme. According to the Australian Tax Office website, all Australian companies with a turnover of less than $5 billion are eligible for the new asset write-off.

Therefore, unless you own one of the largest businesses in Australia, it will apply to you.

What assets can I claim as a write-off?

Your business can write off any assets that are considered depreciable assets under the ATO’s criteria. Unlike in the previous years, there is no limit to the value of the new assets.

(Previously, you could only claim a write off of new assets to the value of $150,00.)

New Assets must have been purchased after 7.30 pm AEDT on 6 October 2020 and be ready to use by 30 June 2022.

Second-hand assets can also be claimed by businesses with a turnover of less than $50 million in revenue. If you’re between $50 and $500 million in revenue, up to the value of $150,000.

Assets you claim may include tools and machinery, IT equipment such as laptops and tablets, office furniture and work vehicles. There are some exclusions to the assets that you can claim, such as assets that are leased out or used in research and development activities. Check out the ATO Assets and Exclusions webpage for clarification.

How can my business benefit?

Essentially, your SME can now claim a tax deduction for the full purchase price of a new asset, as long as the asset is installed and used in the period mentioned above. Previous to this, you would have to claim depreciation over a number of years for new assets.

Undoubtedly, this scheme may seem confusing to some. Take a look below at an example of how the extension of the asset write-off can help a small Australian business:

Marco owns a restaurant and wants to buy three new large refrigerators for storing ingredients. On April 3, 2021, he purchased the new assets for a total of $15,000 (not including GST). The freezers are installed on May 3, 2021, and the restaurant starts using them straight away. By buying the new asset in this period, Marco will reduce his tax payment by $3,900 (with the Company tax rate of 26%).

In order for your business to benefit, ensure you keep a thorough record of the assets you want to claim under the scheme and how much they cost.

Engage Propel Business Group’s Accounting & Tax Experts to take advantage of the asset write-off scheme extension.

Our professional accounting staff provide a personalised service to ensure that you are making the most of this scheme’s extension and help you reduce your small business’s tax bill.

Get in touch with our team to learn more.

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