{"id":218,"date":"2021-08-03T09:17:44","date_gmt":"2021-08-03T09:17:44","guid":{"rendered":"https:\/\/solarsons.com.au\/?page_id=218"},"modified":"2021-09-27T05:56:13","modified_gmt":"2021-09-27T05:56:13","slug":"instant-asset-write-off","status":"publish","type":"page","link":"https:\/\/solarsons.com.au\/instant-asset-write-off\/","title":{"rendered":"Instant asset write off"},"content":{"rendered":"

[vc_section full_width=”stretch_row” el_class=”inner_banner inner_banner_twolines” css=”.vc_custom_1628134528966{background-image: url(https:\/\/solarsons.com.au\/wp-content\/uploads\/2021\/08\/Instantassetwrite_banner-1.jpg?id=297) !important;background-position: center !important;background-repeat: no-repeat !important;background-size: cover !important;}”][vc_row][vc_column][vc_custom_heading text=”Instant asset write –
\noff thresholds” font_container=”tag:h1|text_align:left” use_theme_fonts=”yes”][\/vc_column][\/vc_row][\/vc_section][vc_section full_width=”stretch_row” el_class=”assets_sec”][vc_row][vc_column][vc_custom_heading text=”What Is Instant Asset Write Off?<\/strong>” use_theme_fonts=”yes”][vc_column_text]The instant asset write off or the temporary full expensing as it\u2019s now called is simply a scheme to encourage small business owners to invest more in their businesses by offering tax deductions on assets bought and used within the financial year.[\/vc_column_text][vc_custom_heading text=”Here is how it works:” font_container=”tag:h3|text_align:left” use_theme_fonts=”yes”][vc_column_text]As we all know, taxes are calculated depending on your net income during the financial year.
\nSo if you made a 100 thousand dollars profit this year, then you have to pay 25 thousand dollars (25%) in taxes.<\/p>\n

But what if you bought a $100,000 piece of equipment that has an expected useful lifespan of 10 years, shouldn\u2019t this money be
\nconsidered as a cost?<\/h4>\n

Well, under the old scheme (depreciation), you will have to depreciate this equipment cost (100 thousand dollars) over its expected useful lifespan (10 years). In other words, you get 10 thousand dollars in tax deductions every year for 10 years.<\/p>\n

So far it\u2019s great, you are saving some money after all. However, the problem is that because you only get a 10 thousand dollar deduction in year one, the rest of your equipment cost (90 thousand dollars) would still be seen as an outgoing cash flow in your PI (Profitability Index).<\/p>\n

The result?<\/h4>\n

Now you have to pay tax for this 90 thousand dollars even though you had spent it on the business\u2019s development. So this costs you an extra 22.5 thousand dollars, which makes absolutely no sense.<\/p>\n

Luckily for us, a new scheme was introduced, the temporary full expensing scheme or the new instant write off scheme.
\nFrom its name, you know that the payback for your investment will be instant and you don\u2019t have to depreciate the equipment\u2019s value over many years.<\/p>\n

Using the same example as before, if your business has a net profit of 100 thousand dollars and you bought the same piece of equipment that costs exactly 100 thousand dollars, then with the new instant asset write off scheme, your equipment price will be treated as a cost instead of outgoing cash flow.<\/p>\n

This means that because your net income is 100 thousand dollars and you spent 100 thousand dollars on business equipment, then your PI will change from profit to breakeven and you won\u2019t have any profit for taxation.<\/p>\n

Thus, you won\u2019t have to pay any taxes at all and you will save 22.5 thousand dollars. Pretty good, huh?<\/h4>\n

It\u2019s important to mention that this doesn\u2019t mean you should go on a shopping spree as this won\u2019t make you any profit, in fact, it will lose you a lot of money.[\/vc_column_text][\/vc_column][\/vc_row][\/vc_section][vc_section full_width=”stretch_row” disable_element=”yes” el_class=”instant_sec”][vc_row el_class=”ins_head”][vc_column][vc_custom_heading text=”Instant asset write-off thresholds<\/strong>” font_container=”tag:h2|text_align:center” use_theme_fonts=”yes”][vc_column_text]Using the simplified depreciation rules, assets costing less than the relevant instant asset write-off threshold are written off in the year they are first used, or installed ready-for-use. This threshold applies to each asset irrespective of whether the asset is purchased new or second-hand.<\/p>\n

The threshold has changed over the last few years and during the current year as shown in the table below.[\/vc_column_text][\/vc_column][\/vc_row][vc_row][vc_column][vc_column_text]<\/p>\n\n\n\n\n\n\n\n\n\n
Date Range<\/td>\nThreshold for each asset<\/td>\n<\/tr>\n
7:30pm (AEDT) 02\/04\/2019 to 30\/06\/2020<\/td>\n$30,000<\/td>\n<\/tr>\n
29\/01\/2019 to before 7.30pm (AEDT) 02\/04\/2019<\/td>\n$25,000<\/td>\n<\/tr>\n
7.30pm (AEST) 12\/05\/2015 to 28\/01\/2019<\/td>\n$20,000<\/td>\n<\/tr>\n
01\/01\/2014 to prior to 7.30pm (AEST) 12\/05\/2015<\/td>\n$1,000<\/td>\n<\/tr>\n
01\/07\/2012 to 31\/12\/2013<\/td>\n$6,500<\/td>\n<\/tr>\n
01\/07\/2011 to 30\/06\/2012<\/td>\n$1,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

[\/vc_column_text][vc_column_text el_class=”instant_cont”]The entire cost of the asset must be less than the instant asset write-off threshold, irrespective of any trade-in amount. Whether the threshold is GST exclusive or inclusive will depend on your GST status, for further information about GST impacts see Cost.<\/p>\n

In working out the amount you can claim, you must subtract any private use proportion. The balance (that is the proportion used in earning assessable income) is generally the taxable purpose proportion. While only the taxable purpose proportion is deductible, the entire cost of the asset must be less than the threshold.<\/strong>[\/vc_column_text][\/vc_column][\/vc_row][\/vc_section][vc_section full_width=”stretch_row” el_class=”example_sec”][vc_row][vc_column][vc_custom_heading text=”Here are 2 examples of a good investment and a bad investment.<\/strong>” font_container=”tag:h3|text_align:center” use_theme_fonts=”yes”][\/vc_column][\/vc_row][vc_row el_class=”example_block”][vc_column width=”1\/2″][vc_custom_heading text=”Example: 1
\nOliver\u2019s Solar System” font_container=”tag:h2|text_align:center” use_theme_fonts=”yes”][vc_column_text]Oliver owns a small grocery store in Queensland that made 100 thousand dollars in profit this year.<\/p>\n

Oliver noticed that utility bills are getting more and more expensive, so he decided to buy a small 10KW solar system to help reduce its energy expenses. This system cost him about 7 thousand dollars and thanks to the instant asset write off, Oliver\u2019s new net income will be 93 thousand dollars and he will only pay 23.5 thousand dollars instead of 25 thousand dollars. In other words, he saved 1500 dollars.<\/p>\n

However, because this is a great investment, this solar panel system will save him around 50 thousand dollars in utility bills over 20 years.
\nSo overall, Oliver made about 50 thousand dollars on a 5.5 thousand dollars investment. That\u2019s almost 100X ROI.<\/p>\n

That\u2019s not just it, because Oliver installed a solar system, he is now eligible for the Small Scale Renewable Energy Scheme, which will save him even more money.<\/p>\n

And finally, if Oliver owns the property he installed the solar system on, this property\u2019s value is potentially increased as well. What an amazing investment. [\/vc_column_text][\/vc_column][vc_column width=”1\/2″ el_class=”exmple_mid”][vc_custom_heading text=”Example: 2
\nOliver\u2019s Batmobile” font_container=”tag:h2|text_align:center” use_theme_fonts=”yes”][vc_column_text]Oliver, who is a huge Batman fan, got himself the best accountant in the world that somehow convinced the Australian Tax Office that buying a batmobile is actually crucial for Oliver\u2019s grocery store success.<\/p>\n

So Oliver, who had a 100 thousand dollars net profit, bought a really small batmobile for 100 thousand dollars.<\/p>\n

Fun fact:<\/strong> In 2013, the original batmobile was sold for 4.6 million dollars at the Berrett-Jackson classic car auction.<\/p>\n

Back to our very \u201cPOSSIBLE\u201d scenario, thanks to the temporary full expensing scheme, now Oliver is eligible for around a 60 thousand dollar tax deduction assuming that the batmobile will be only used for businesses purposes (vehicle has a deduction threshold of about 60 thousand dollars).<\/p>\n

After doing the math, Oliver will only pay 10 thousand dollars in tax instead of 25 thousand dollars, so he saved 15k.[\/vc_column_text][\/vc_column][\/vc_row][\/vc_section][vc_section full_width=”stretch_row” el_class=”rebates_faqsec” css=”.vc_custom_1628161617762{background-image: url(https:\/\/solarsons.com.au\/wp-content\/uploads\/2021\/08\/rebates_bg.jpg?id=335) !important;}”][vc_row][vc_column][vc_tta_accordion c_position=”right” active_section=”1″ collapsible_all=”true”][vc_tta_section title=”Who Can Benefit From The Temporary Full Expensing Scheme?” tab_id=”faq1″][vc_column_text]Literally, any small business owner can benefit from the instant asset write off as long as the business has an aggregated turnover of less than 5 billion dollars and meets the alternative income test.<\/p>\n

However, it\u2019s important to mention that to claim the deductible, you must first use the asset before June 30, 2022.[\/vc_column_text][\/vc_tta_section][vc_tta_section title=”What Assets Are Eligible For The Instant Asset Write Off?” tab_id=”faq2″][vc_column_text]Most plants and equipment asset purchases are covered by the temporary full expensing scheme including tools, office equipment, generators, solar system, vehicles, etc.[\/vc_column_text][\/vc_tta_section][vc_tta_section title=”Can I Claim The Deduction For Second Hand Assets?” tab_id=”faq3″][vc_column_text]Yes, second hand goods are also eligible for the instant asset write off scheme as long as your business\u2019s turnover is less than 5 billion dollars.[\/vc_column_text][\/vc_tta_section][vc_tta_section title=”What About Equipment Improvement?” tab_id=”faq4″][vc_column_text]If you got a piece of equipment you can improve it to work and still claim on the improvements you have made to that piece of equipment under the instant asset write off scheme.[\/vc_column_text][\/vc_tta_section][vc_tta_section title=”What Assets Are Not Covered By The Temporary Full Expensing Scheme?” tab_id=”faq5″][vc_column_text]<\/p>\n