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The $20,000 instant asset write-off explained

Adam Zuchetti
Adam Zuchetti
26 May 2017 1 minute readShare
tax receipts 20000 instant asset write off

Don't really understand what the $20,000 instant asset write-off is all about? You’re far from alone – with research suggesting up to two-thirds of businesses are underutilising this tax deduction.

Following a national survey by Officeworks and H&R Block, it was revealed that 78 per cent of SMEs don’t fully understand what the tax break entails.

A major problem is that just one in ten business owners could correctly identify items that can be claimed as an asset write-off.

“A lot of small business owners relegate tax to the ‘too hard’ basket and take little interest in tax matters. However, being more proactive and spending time on understanding the opportunities and overcoming their pain points, will benefit their business in the long run,” explains Mark Chapman, director of tax communication at H&R Block.

What does ‘instant’ mean in this case?

Sadly, it doesn’t mean that you will get the cash back from the ATO straight away.

According to business.gov.au, “it means that you can reduce your taxable income, and your tax payable, in the financial year that you bought and installed them.”

So what can you claim an instant deduction for?

Generally speaking, the deduction is primarily intended for physical assets. Think back to the controversy that erupted about the café owner and an expensive industrial toaster.

Equipment, vehicles, tools and electronics (such as computers and phones) can all be claimed as part of the scheme.

There is also no limit when knowing how to claim instant asset write off. However, each one must cost less than $20,000.

It’s important to note that the deduction only applies to assets used for business purposes. If an asset – for example a computer – is split between personal and business use, you can only claim the deduction on the portion that is used for business.

What assets are excluded from the instant deduction?

According to the ATO website, the following are excluded from the instant deduction scheme:

• Assets that are leased out for more than half of the time on a depreciating asset lease
• Assets already allocated to a low-value pool
• Horticultural plants, including grapevines – these are covered by specialised deductions
• Capital works
• Software

Don't claim depreciation!

You may be tempted to try and double dip by claiming the initial write-off and then depreciating the asset in subsequent tax years, but this is a no-no the tax office will likely clamp down on in this and future tax years.

Essentially, the write-off enables you to claim the depreciation deductions on the life of that asset in one go up-front, therefore it can't be repeated in future years.

The $20,000 instant asset write-off explained
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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