Small businesses must act quickly and take advantage of the favourable but temporary instant asset write-off conditions, as it is about to be reduced $20,000 in July.
Starting from the 2023-24 financial year, businesses with an aggregated annual turnover of less than $10 million will only be able to claim an instant asset write-off of up to $20,000 per asset. This means that for any asset purchases above $20,000, businesses should act swiftly and make their purchases before June 30th to take advantage of the current and more-favourable write-off conditions.
The Changes Explained
The instant asset write-off scheme allows eligible businesses to claim an immediate tax deduction for assets they purchase for their business. Currently, the threshold is unlimited, however, as of July 2023, the threshold will be set to $20,000.
Instant asset write-off was developed by the government to encourage small businesses to invest in new equipment, technology, and infrastructure, thereby stimulating economic growth and productivity.
Under the new regulations, small businesses with an aggregated annual turnover of less than $10 million can instantly write off the cost of assets they acquire, provided each asset is individually valued at $20,000 or less.
The $20,000 threshold will apply on a per-asset basis, allowing small businesses to instantly write off multiple assets valued under $20,000.
Assets over $20,000 will continue to be placed into the small businesses depreciation pool and depreciated at 15% in the first income year and 30% each year after that.
Although the write-off value is reducing, it can still bring about several benefits to small businesses:
- Financial Relief: Small business owners can enjoy immediate tax deductions for asset purchases, reducing their taxable income and providing much-needed financial relief.
- Stimulated Investment: By incentivizing asset acquisition, small businesses can invest in their operations, upgrade equipment, and adopt new technologies, thus boosting productivity and competitiveness.
Small business owners are strongly advised to consult with their accountants and take advantage of the current threshold before June 30, 2023, while also considering their asset investment plans for the upcoming financial year.
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