The end of the financial year is just around the corner so now’s the time for Aussie businesses to make the most of their claims. This year is the best it has been in years for claiming instant asset write-offs for new asset purchases.
The Federal government has just announced new asset threshold amounts and increased the business turnover value so more businesses than ever can take advantage of the generous simplified depreciation rules. The initiative allows businesses to purchase high-quality office furniture that will benefit the bottom line for many years.
All information in the article is general in nature, you need to consult with a qualified professional to get personalised advice for your own business.
The $30,000 Tax Write Off Explained
In simple terms, small and medium-sized Australian businesses can claim an immediate tax deduction when they buy an asset for less than $30,000. This is a tax relief initiative from the Australian government intended to simplify rules around asset write-offs and depreciation of assets.
This initiative commenced in 2015 and has now been extended until 2020. This year (2019) the criteria was expanded to allow medium-sized businesses to participate and the threshold was increased from $20,000 to $30,000.
Which Businesses are Eligible?
Small and medium-sized businesses are eligible to use the simplified depreciation rules. The ATO bases the size of the business on aggregated turnover - the total normal income of the business plus income of any associated businesses.
The business turnover amount has changed in 2019 to include businesses with a higher turnover. Previously, businesses had to have a turnover of less than $10 million to use the simplified depreciation rules. But from 2 April 2019, businesses with a turnover between $10 million and $50 million may be eligible for instant write-off of assets purchased after 2 April 2019.
It is still a good idea to check with your accountant that your business is eligible before making your purchases.
Isn’t it a $20,000 tax write off, not $30,000?
In the past, businesses could claim an instant asset write-off for assets of less than $20,000 however the instant asset write-off threshold has changed in the last few months:
- For assets bought and installed between 12 May 2015 to 28 January 2019, you can instantly deduct the business portion of depreciating assets costing less than $20,000.
- For assets bought and installed from 29 January 2019 until 2 April 2019, you can instantly deduct the business portion of depreciating assets costing less than $25,000.
- For assets bought and installed from 2 April 2019 to 30 June 2020, you can instantly deduct the business portion of depreciating assets costing less than $30,000.
Which Assets are Eligible?
Most assets are eligible if the entire cost of the asset (including GST) is less than the threshold amount. The asset must be used or installed in the year you claim the deduction.
Even if you don’t claim the full purchase price of the asset because you intend to use the asset for personal use for part of the time, the value of the asset must not exceed $30,000 (if purchased after 2 April 2019). Assets valued over $30,000 must use the general depreciation rule or small business pool, depending on the business turnover.
At a later date, if you sell or dispose of an asset for which you have claimed an instant asset write-off, you need to include the amount received as assessable income.
Why Purchase Office Furniture?
Instant write-off isn’t suitable for large assets like a car or ute because their value can’t be a dollar over $30,000 to qualify. But with office furniture if the total purchase comes to $35,000, you can still use instant asset write-off because each asset (desk, chair etc) is less than $30,000. So whether your business needs a few office chairs or a whole home office fit-out with ergonomic workstations and chairs, instant write-off is perfect.
Investing in office furniture benefits your staff and the business. Ergonomic equipment helps keep employees safe from injuries, and allows staff to work more comfortably which improves productivity. Few business assets like office furniture can improve worker output and provide a return on investment for many years after depreciation.
Which Assets Aren’t Eligible for Instant Write Off?
The ATO deems some assets as capital works such as building, extensions and structural improvements like fences and driveways. These assets are written off over a longer period than depreciating assets. The deduction on these items is calculated using the Depreciation and Capital Allowances Tool.
There has never been a better time to update your office with new ergonomic furniture to help keep staff safe and productive.
More Information About Asset Depreciation
Before making any purchases, check with your accountant that your business is eligible. If you have any queries about simplified asset depreciation, talk to your accountant or the Australian Taxation Office. But remember, you only have until June 30 to make your purchases or wait until next financial year to claim the depreciation.
For personalised advice on which office equipment is the most suitable for you, visit the Ergolink showroom, call us on (08) 9240 7066 or contact us online.