Immediate tax write-off for small businesses

The $20,000 immediate asset tax write-off can bring valuable benefits to small businesses.

Here are some fast facts about the write-off:

• Any relevant asset costing less than $20,000, excluding Goods and Services Tax (GST), qualifies for the instant write-off.
• Depreciation over a number of years will be observed for assets that cost more than $20,000
• The write-off is applicable to both new and second-hand assets.
• Where multiple items or assets are acquired/purchased, each costing less than $20,000, the individual cost of each item becomes eligible for the deduction.
• Only small businesses are eligible for the said tax break.

Assets that can be wrote-off

Examples of items that small businesses could claim using the instant tax break:

• Technology, tools, and equipment
• Motor vehicles and automobiles
• Office furniture and works of art
• Solar power systems
• Medical machinery and equipment
• Other relevant assets

Technology, tools, and equipment

Office equipment such as laptops, desktop computers, tablets, copiers, and printers are eligible for the instant tax break. They can be claimed separately, which means that if a business bought 30 desktop computers for $1,700 per unit, the business owner can claim the write-off even if their total cost goes beyond $20,000.

The same logic applies to equipment and machinery, which is especially beneficial for small businesses in the construction industry.

Motor vehicles and automobiles

Many second-hand vehicles qualify as opposed to new ones, which isn’t hard to understand because of the high costs of new cars/vehicles. Learn more about writing off a car purchase on taxes here.

Office furniture and works of art

Office furniture such as filing cabinets and desks are all eligible for the tax break...

Business owners can also claim a tax deduction for certain works of art if it can be proved that these are an essential part of the business or organisation.

Solar power systems

Consider solar power system installations as these systems are eligible for the tax break.  Aside from reducing the cost of energy consumption, business owners can also enjoy tax deductions.

Medical machinery and equipment

If the small business runs medical services and practice or if it has medical machinery and equipment relevant to business operations, it applies for the instant tax write-off. The equipment used will be eligible regardless whether it be specialised (imaging equipment, medical implements, etc.) or general in nature (medical monitors, medical apparatuses, seating, etc.).

Other relevant assets

Provided that there is proof that these assets are essential in business operations or any other business-relevant activities, TV sets (even gaming consoles), pool and ping-pong tables, gym machinery and equipment, and kitchen equipment in business location(s) can be eligible for the tax break.

Take account of the following considerations:

• How does the instant tax write-off work
• Available only to small businesses
• Goods and Services Tax (GST) exclusive value
• Claiming a deduction
• Eligible assets

How does the instant tax write-off work

A cash handout of $20,000 is not a measure nor a form of investment allowance. It is a deduction of assets worth or costing less than $20,000 that can reduce the tax payable if there is a tax liability for a specific income year.

Available only to small businesses

The immediate deduction is available only to small businesses with an aggregated turnover of less than $10 million. In some cases, this definition can be quite complicated. Consult with the tax authorities and engage the services of a trusted accountant and/or lawyer with a proven expertise on the instant tax write-off system.

Goods and Services Tax (GST) exclusive value

The relevant legislation mandates that the amount should be the GST exclusive value. If this is the case, a small business taxpayer is entitled to claim an input tax credit on the purchase for GST purposes.

Claiming a deduction

The asset should be used or installed ready-for-use by the business during the income year in order to be eligible for the tax deduction. This does not include the placement of an order at year-end for an asset in which possession will be taken in the following income year.

Eligible assets

All assets are eligible, except for specific assets exclusions which receive different depreciation treatment.

To ascertain which assets are eligible and which aren’t, consult with the tax authorities and engage the services of a trusted accountant and/or lawyer.

Immediate tax write-off for small businesses

Julianne Leybag

Last Updated: 12 July 2018 Published: 05 June 2018