The legislation extending the $20,000 immediate asset write-off for another year to 30 June 2019 has finally passed both Houses after having been introduced into Parliament in May, following the Federal Budget announcement.

The immediate asset write-off is available for small businesses with aggregated annual turnover under $10 million. Small businesses will be able to immediately deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2019. Only a few assets are not eligible (such as capital works, horticultural plants, in-house software and certain lease assets as explained below). Motor vehicles are eligible assets, and while the $20,000 is quite a low threshold in terms of cars, it is worth noting that second-hand assets are eligible for the write-off.

Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business general depreciation pool and depreciated at 15% in the year of purchase and 30% each income year thereafter. The pool can also be immediately deducted if the balance falls below $20,000 during the period to 30 June 2019.

Please note that if the business which acquired the assets then leases them to another entity, other than on short terms leases, those assets are not eligible for the immediate write-off or the small business general depreciation pool treatment. Standard depreciation rules would apply to the assets leased on long-term basis.

As these rules only apply to small businesses as defined in the tax law, entities that do not meet the definition of a small business, including those whose activities are not classified as running a business, will need to apply the usual depreciation rules instead and write off their new assets over the course of the assets’ effective lives.

Please contact your Ruddicks adviser if you would like to find out more about the immediate asset write-off and whether your business qualifies for it. This concessional tax treatment for newly acquired assets can create fantastic tax planning opportunities for small businesses that are considering updating or expanding their assets.

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The content of this newsletter is general in nature. It does not constitute specific advice and readers are encouraged to consult their Ruddicks adviser on any matters of interest. Ruddicks accepts no liability for errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice. This information is current as at 18 September 2018, and was published around that time. Ruddicks particularly accepts no obligation or responsibility for updating this publication for events, including changes to the law, the Australian Taxation Office’s interpretation of the law, or Government announcements arising after that time.

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