$20,000 instant asset write off

This is the final year of the $20,000 instant asset write-off – to be abolished from 1 July 2018. 

Until 30 June 2018, Small Business Entities (SBE’s) can claim an immediate write-off for most depreciating assets used in their business if the asset costs less than $20,000 and the below time frames are met. In broad terms, SBE’s are entities (including sole traders) that are carrying on a business and have an annual turnover of under $2 million. This includes the turnover of any connected entities and affiliates. 

Being in its final year of operation, the timing requirements around the instant asset write-off are important.

To claim a deduction in 2017/2018, the asset must have been acquired on or after 1 July 2017 and first used or installed ready for use in your business on or before 30 June 2018.  To be claimable in full in 2017/2018.  

If you miss the deadline (i.e. if the asset is not being used in your business or installed ready for use on or before 30 June 2018) then the write-off threshold reverts to $1,000. 

Missing the deadline will result in a worse cash-flow outcome for your business than if the deadline is met . 

WHAT’S THE BENEFIT?

The real benefit from the $20,000 write-off is an improvement to your cash-flow. The write-off improves small business cash-flow by bringing forward deductions rather than having them spread out over more than one year. Cash-flow can be a significant issue for small business, particularly start-ups. That said, it is important to have perspective. You are only getting back the tax rate on the asset, not the full value of the asset. This is the same as the old law where the write-off was $1,000 (which will apply from 1 July 2018).  You don’t get any extra cash than you would otherwise have received under the old rules – you simply get it sooner.

Consequently, you should not let tax distort or blur your commercial instincts – as you don’t get any extra cash than you would otherwise have under the old rules, you should continue to only buy assets that fit within your business plan .