With the 2022 EOFY fast approaching, we thought it would be the perfect time to jog your memory about the Temporary Full Expense Asset Write-Off. You know, the tax break formally known as ‘Instant Asset Write-Off’.
Clearly one of the best tax breaks ever available to businesses. Instead of depreciating assets over years, you could claim back the entire amount that same financial year.
Although all good things must come to an end, after the effects Covid-19 on the Australian economy, the government extended the tax break with a new name and a few changes. Thus, the Temporary Full Asset Write-Off was born.
Temporary Full Asset Write-Off.
Covering purchases made between October 6, 2020, and June 30, 2023 (yep, next year), there have been a few changes to the original Instant Asset Write-Off to help businesses out.
One of the biggest changes is to aggregated turnover caps (a company’s annual turnover, plus the annual turnover of any business connected to it, or an affiliate). Where the Instant Asset Write-Off capped eligible businesses at $500 million, the Temporary Full Asset Write-Off cap is now $5 Billion.
There’s also been changes to purchasing limits. While the Instant Asset Write-Off had three limits during its time, with the last being $150,000 – the Temporary Full Asset Write-Off is a lot more generous.
However, before you go on a spending spree always double-check with your accountant and the ATO to see if there are limitations on certain assets, like passenger vehicles.
Another win for many businesses is the change to the type or assets you can claim for. If you have a:
- business with an aggregated turnover of $5 billion you can claim on a new eligible depreciating asset.
- turnover under $50 million you can claim on eligible second-hand assets.
- turnover under $10 million you can claim the balance of a small business pool at the end of each financial year.
Eligible assets are deemed as:
- tools and equipment (for example, electric sanders and saws)
- computers, laptops and tablets
- office furniture (freestanding)
- office equipment (for example, coffee machines)
- motor vehicles (for example, cars, vans and tractors).
We’re not tax experts and will always recommend you speak with a tax professional to understand what assets are eligible under the Temporary Full Expense Asset Write-Off.
Things to Keep in Mind.
The Temporary Full Expense Asset Write-Off is the perfect tax break for many businesses. While you’re considering what your business needs, here are some things to keep in mind:
- You need to be in business. Simply having an ABN won’t cut it.
- Depending on your business, both new and second-hand assets qualify.
- It’s not cash-back. It’s an immediate reduction of your taxable profit.
- The immediate deduction is worked out on a GST-exclusive basis. If you’re registered for GST, the deduction is worked out net of GST.
- You can claim each asset under the relevant threshold. For example, if you had purchased two assets prior to June 30, 2022, you could claim both assets for the 2021/22 financial year.
- The asset must be used or installed before the end of the financial year for you to claim. So, if you purchased an asset on June 29, 2022, but it couldn’t be used or installed until July 7, 2022, you would need to wait until 2022/23 tax time to make a full expense claim.
If you want to delve deeper than an abalone diver for more information on the Temporary Full-Expense Asset Write-Off, visit the site today.
If you’re looking to upgrade your work vehicle, contact Mavin Hino and have a chat to see what will best suit your business and needs.