Small Business Instant Asset Write Off

Have you heard of the Instant Asset Write-Off?

It’s tax time which can be a stressful period for small business. If you are a small business owner, it is important to be aware of incentives that you can benefit from including the Instant Asset Write-Off.

To support small businesses and encourage investment, the Australian Taxation Office (ATO) introduced the Instant Asset Write-Off scheme. This initiative allows eligible businesses to claim an immediate deduction for the cost of eligible assets, providing a significant financial advantage. 

Understanding the Instant Asset Write-Off

The Instant Asset Write-Off scheme allows small businesses to immediately deduct the full cost of assets for their businesses including higher-value assets such as cars, technology and machinery. This means that businesses can claim the deductions in one lump sum, instead of waiting to claim them over several years.

By enabling businesses to reduce their taxable income, this scheme effectively reduces the amount of tax payable, freeing up valuable resources for reinvestment and growth.

Benefits of the Instant Asset Write-Off

Improved Cash Flow
By allowing businesses to claim an immediate deduction for the cost of eligible assets, the Instant Asset Write-Off scheme provides an immediate boost to cash flow. This increased liquidity can be reinvested into the business for expansion, hiring new employees, or upgrading equipment and technology.

Tax Savings
The scheme reduces the amount of taxable income, resulting in lower tax obligations for eligible businesses. This reduction in tax liability can free up funds that can be utilised to invest in other areas of the business, such as marketing, research, or staff development.

Business Growth
The Instant Asset Write-Off scheme stimulates economic growth by incentivising small businesses to invest in new assets. Upgrading equipment, machinery, and technology can enhance productivity, efficiency, and competitiveness, positioning businesses for long-term success and expansion.

Eligibility Criteria

To be eligible for the Instant Asset Write-Off, businesses must meet specific criteria set by the ATO. 

  • The business must be classified as a small business entity, typically defined as having an aggregated annual turnover of less than $500 million
  • Eligibility will depend on the date you purchased the asset and when it was first used or installed ready for use
  • The asset can be new or used
  • The cost of the asset must be below the current threshold set by the ATO

How to take advantage of the Instant Asset Write-Off

To make the most of the Instant Asset Write-Off scheme, small business owners should consider the following steps:

  1. Understand your eligibility: Familiarise yourself with the eligibility criteria outlined by the ATO to ensure your business qualifies for the scheme
  2. Identify eligible assets: Determine which assets your business needs and ensure they meet the eligibility requirements for the write-off
  3. Keep accurate records: Maintain detailed records of asset purchases, installation dates, and costs to support your deduction claim
  4. Seek professional advice: Consult with a tax professional or accountant who can provide guidance tailored to your business’s specific circumstances and help maximise your deductions.

To learn more about Instant Asset Write-Off or to learn more about getting your business sorted for tax time, get in touch with the team at APS Tax.

What other incentives should small businesses be aware of?

As well as the Instant Asset Write-Off, it is important to be aware of other incentives that businesses can be taking advantage of during tax time.

The Small Business Technology Investment Boost
As part of the Small Business Technology Investment Boost, small businesses (with an aggregated annual turnover of less than $50 million) will be able to deduct an additional 20 per cent of expenses for the purposes of business digital operations or digitising operations. This includes business expenses and depreciating assets such as payment devices, cyber security systems or subscriptions to cloud-based services.

Small Business Skills and Training Boost
The Small Business Skills and Training Boost allows small businesses (with an aggregated annual turnover of less than $50 million) to deduct an additional 20% of expenditure that is incurred for training courses for their employees by registered providers in Australia. 

Get in touch with the team at APS Tax to learn more about other ways to make the most of incentives this tax time.

Written by Richard Ferraro, Chief Financial Officer & Head of APS Tax

Richard is a graduate of the Australian Institute of Company Directors (GAICD) and Fellow Certified Practising Accountant (FCPA) with 3 decades of experience in Financial Accounting, Tax Compliance and Advisory. Prior to the 11 years currently working at APS, Richard was a partner in a top 100 accounting firm, and a Taxation Manager for large corporations such as Nissan Australia, Bendigo and Adelaide Bank, NEC Australia and Australia Post. 

Richard supports his clients across a wide range of services including tax compliance and advisory services to clients who are Companies, Trusts, Partnerships, Self Managed Super Funds, When Richard isn’t working he enjoys spending time with family and friends, watching the mighty Magpies, and anything to do with cars from F1 to supercars and collectables.