RSM Australia

Instant asset write off extended

Tax Insights

In an effort to promote further investment by Australian business, the Federal Government has announced an extension of the instant asset write off to 31 December 2020.

Legislation is expected to be introduced shortly.

This is a welcome measure as it effectively recognises that businesses are still dealing with cashflow and supply chain challenges in the run up to financial year end as the nation continues to move out of lockdown.The instant asset write off extension to 31 December provides further incentive for businesses to invest in capital assets.

With cash flow constraints limiting the ability of some businesses to invest in the immediate term, the extension to 31 December provides further incentive for businesses to invest in capital assets.

What this means is that businesses with a turnover of up to $500 million can write off the full cost of an eligible depreciating asset up to the threshold of $150,000 provided the asset is first used or installed ready for use by 31 December 2020. This threshold applies to used as well as new assets and importantly, applies to multiple asset purchases with the threshold applying on an asset by asset basis.

It is important however to keep in mind the eligibility of assets to qualify for the instant asset write off. For example, while passenger vehicles are eligible, the luxury car depreciation limit ($57,581 for the 2020 financial year) will limit the write off available for these vehicles with a cost exceeding that.

Additionally, whilst we have seen the instant asset write off extended, and the threshold increased a number of times since its introduction, the government is expected to wind back the threshold from 1 January 2021 to $1,000 (per asset) and restrict its application once again to small business entities (with a turnover below $10 million).

How can RSM help?

If you need assistance with the instant asset write off or any COVID-19 related queries, RSM Australia has specialists across the country ready to help. For an initial conversation, please contact your local RSM office.

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