The instant asset write-off, which was due to expire on 30 June 2024, was recently extended by another 12 months, which means eligible businesses can continue taking advantage of this tax benefit in the 2024-25 financial year.
Under the instant asset write-off, eligible businesses can immediately deduct the full cost of eligible assets under $20,000, as long as they are first used or installed by the end of June 2025.
To qualify for the scheme, a business must have an annual turnover of less than $10 million.
The instant asset write-off can be used for both new and second-hand assets. It can also be used for multiple assets if the cost of each individual asset is less than the relevant threshold.
When claiming the benefit, the business must apply the simplified depreciation rules (it can’t be used for assets that are excluded from those rules).
According to the ATO, assets valued at more than $20,000 (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that.
How to capitalise on the instant asset write-off
The instant asset write-off incentivises businesses to invest in profit-generating machinery and equipment.
So the way to think about the incentive is for a business to identify which parts of its operations would become more profitable by investing in the right assets. For example:
- Would the business’s BDM make more sales if they had a company car to visit prospects?
- Would warehouse staff pack and unpack faster if they had a forklift?
- Would the assembly line produce more widgets if it had more modern machinery?
Businesses should also speak to their accountant, to understand how much they could invest, and their broker, to understand their borrowing capacity.
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