With the $20,000 asset write-off extended for another year, SMEs are asking how they can take advantage of this tax break, but many are confused about whether taxes and add-ons form part of the deductible threshold.
Then federal Treasurer Scott Morrison announced plans in the May budget to extend the instant asset-write off for businesses turning over up to $10 million annually in the recent budget for another year, which had been scheduled to wind up on 30 June this year.
Yet several years after it was first announced, much confusion still remains about what exactly is covered under the scheme.
One My Business reader commented that they had used the deduction for the purchase of a new vehicle, but that the entire cost came in at around $23,000.
The reason for this, they claimed, was that the final sum paid included the like of stamp duty and on-road charges, which are actually surplus to the cost of the vehicle itself.
According to Peter Murray and Todd Bromwich of business and tax law firm Hall & Wilcox, the asset write-off is the option to “immediately deduct the value of the asset in the year it was purchased”.
“The cost of the asset is what you have paid for it, including any GST paid if you are not registered for GST and additional amounts spent on transporting, installing and improving the asset,” they told My Business.
“[However] for motor vehicles, amounts paid for CTP, registration and extended warranty are not included in the asset’s cost.”
According to the duo, businesses can claim the deduction on an unlimited of number of purchases, as it works on a “per asset basis”.
“This means that there is no limit on how many times a business can apply the instant asset write-off in a year. For example, if a business buys four cars to be used entirely for business purposes at a cost $18,000 per car, they may choose to deduct the entire cost of each car in that income year.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.