Stimulating investment is high on the Government’s agenda. To encourage spending, the 2021-22 Budget introduced a measure that allows businesses with turnover under $5bn* to immediately deduct the cost of new depreciable assets and the cost of improvements to existing assets in the first year of use. This means that an asset’s cost will be fully deductible in the year it’s installed ready for use, rather than being claimed over the asset’s life. And, there is no cap on the cost of the asset.
SECOND HAND ASSETS
When it comes to second-hand assets the rules are a bit different depending on the size of the business. Businesses with an aggregated
turnover under $50 million can claim an immediate deduction for the cost of second-hand assets under the new measures.
Businesses with aggregated annual turnover between $50 million and $500 million can still deduct the full cost of eligible second-hand
assets costing less than $150,000 that are purchased by 31 December 2020 under the existing enhanced instant asset write-off. Businesses
that hold assets eligible for the enhanced $150,000 instant asset write-off will have an extra six months, until 30 June 2022, to first use
or install those assets.
SMALL BUSINESS ENTITIES
For small business entities that have assets in a general pool the changes seek to ensure that pool balances are completely written-off for
tax purposes in the 2021 and 2022 income years. These super-charged immediate deduction rules tie into the existing instant asset
write-off for businesses with a turnover under $500 million (summarised below). The instant asset write-off only applies to certain
depreciable assets. There are some assets, like horticultural plants, capital works (building construction costs, etc.) and certain
intangible assets that don’t qualify for the new rules.
|
Instant asset write-off thresholds |
Aggregated turnover under $10m |
Aggregated turnover under $50m |
Aggregated turnover under $500m |
Aggregated turnover under $5bn |
| 1 July 2018 – 28 January 2019 |
$20,000 |
- |
- |
- |
| 29 January 2020 – 2 April 2020 |
$25,000 |
- |
- |
- |
| 2 April 2020 – 11 March 2020 |
$30,000 |
$30,000 |
- |
- |
| 12 March 2020 – 31 December 2020 |
$150,000 |
$150,000 |
$150,000 |
- |
| 6 October 2020+ – 30 June 2022 |
unlimited |
unlimited |
unlimited |
Unlimited |
If your business will make a tax profit this year, this measure is likely to reduce the taxable income of the business for the year and it
may be possible to vary upcoming PAYG instalments to improve cash flow. If your business operates through a company and will make a tax
loss, you might be able to use the loss to offset tax paid in previous years (see Refunds for Tax Losses).
Alternatively, tax losses can generally be carried forward to a future year.
Give us a call on 03 5911 7000 or email reception@smartbusinesssolutions.com.au if you'd like help understanding what this means for you and your business.
SMART Business Solutions is proud to announce its recognition as the winner of Excellence in Local Community Connection (Medium–Large Business) and Excellence in Access and Inclusion at the 2025 Mornington Peninsula Business Excellence Awards.
It might seem like a clever strategy - moving surplus business cash into your personal mortgage offset account to save on home loan interest, then shifting it back to the company around tax time. But there’s a catch: the ATO sees this, and they’re not fans.
