Making the most of the instant asset write-off

Cash flow is like your daily hit of caffeine. You don’t really notice how important it is for your business until you’ve got to try and operate without it. Today we’ll look at how the recently expanded instant asset write-off initiative can help out in that area.

Today we’re going to home in on an initiative that was put into place by the government within 24 hours of the federal budget being released back in May – the instant asset write-off increase.

What is the instant asset write-off?

Haven’t heard of instant asset write-off yet? You’re not alone. Research shows just half of businesses know about it.

The instant asset write-off allows small and medium businesses to claim immediate deductions of up to $30,000 for new or second-hand depreciable asset purchases.

This can include things like vehicles, tools and office equipment.

Now, the initiative has been around since 2015, but the threshold was increased from $25,000 to $30,000 for purchases made from April 3, thanks to the federal budget.

That means your business is eligible to claim an immediate deduction for the business portion of each asset that costs less than $30,000 if:

– you had a turnover less than $50 million (increased from $10 million after budget night), and

– the asset was first used (or installed ready for use) in the income year you are claiming it in.

Assets that cost $30,000 or more can’t be immediately deducted.

How can it help with cash flow?

Before you go out and buy a $29,990 company car, there are a few things you’ll need to consider.

The first of which is what impact this purchase may have on your cash flow.

Now, the good news is we can help you obtain a business or car loan that will take into account your business’ current cash flow situation.

The even better news is that by using the instant asset write-off initiative, you can get the entire depreciation deduction back next tax year, which is just around the corner in July.

That’s much better for your business’ cash flow than the old fashioned way where you’d only be able to claim a small proportion each year.

These funds can then be used to further expand other parts of your business – so it’s definitely worth thinking about before the financial year ticks over on June 30.

Other key considerations

It’s important to keep in mind that “write-off” doesn’t mean “free asset”.

Basically, this initiative allows you to immediately claim all the tax deductions you would have claimed over the life of the asset.

As we touched upon earlier, getting this cash back sooner means you can re-inject it straight back into other parts of your business.

Also, say the asset will be used 80% of the time for business purposes and 20% for personal usage (examples might include a laptop or a car) then you can only claim deductions for 80% of the asset.

It’s also worth noting that if for example, you buy a $40,000 ute, half of which will be for used work and the other half for play, the asset won’t be eligible for you to immediately write-off the $20,000 business proportion.

Finally, you can take advantage of the instant asset write-off multiple times – the cap is $30,000 per purchase, not overall.

This means you can buy multiple assets that are worth under $30,000 each.

Final word

As we touched upon earlier, for many businesses it can make more sense to take advantage of these changes now that we are at the back end of the financial year.

So if you’d like help obtaining finance that’s friendly on your business’ cash flow then please get in touch. We’d love to help out.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.