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Major Changes to instant asset write-off

Instant asset write-off policies have been expanded as part of the Government’s COVID-19 initiative to encourage business spending in an effort to increase cash flow, stave off an economic recession, boost consumption and protect employment.

The instant asset write-off threshold has been increased from $30,000 to $150,000 and has expanded access to include businesses with an aggregated annual turnover of less than $500 million (up from $50 million). This applies from 12 March 2020 until 31 December 2020, for new or second-hand assets first used or installed ready for use in this timeframe. Items that small businesses can purchase under the new instant asset write-off scheme include:

  • Company vehicles;
  • Computer equipment;
  • Office furniture, facilities; and
  • Solar systems for business premises.

In addition, the Government is introducing a 15 month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation.

As spending money on additional equipment at this time may be problematic given the financial burden placed on businesses during COVID-19, any expenditure needs to be made with respect to the cashflow and tax effect if any purchase, particularly a large one.

Businesses in a position to invest in equipment may be able to take advantage of the write off and offset against any taxable gains they receive as part of the Government economic stimulus initiatives, and at the same time invest to improve business efficiency.