The 2020 Federal Budget has revealed that there will be no limit for claiming an immediate instant asset write-off over the next two years. This is an attempt to breathe new life in to the economy and give new opportunities for Australian business. This is an extension of the previous ‘$150K instant asset write-off scheme’, effective from 6th October.
How Does the Instant Write-Off Scheme Work?
Any new business asset purchased and operating before 30 June 2022, will be eligible to claim the full value as an instant asset write-off. This is essentially accelerating depreciation to allow immediate claims rather than over several years. This gives Australian business the opportunity to upscale and acquire new assets at the government’s expense.
As Treasurer Josh Frydenberg announced in his budget speech “ a trucking company will be able to upgrade its fleet, a farmer will be able to purchase a new harvester and a food manufacturing business will be able to expand its production line.”
So how does this Federal Budget incentive differ from the previous $150K instant asset write-off scheme?
Instant Asset Write-Off Changes
So how does this ‘immediate expensing’ scheme differ for business? The instant asset write-off for business is basically the same except the amount you can now claim is limitless. The main differences are:
- It is available to more Australian businesses. Previously businesses with a turnover up to $500 million were eligible but now it will be available for any Australian business with a turnover up to $5 billion.
- There is no limit on the value of the asset being claimed
- Scheme finishes 30 June 2022
The Federal Budget 2020 has been widely welcomed by the business community. The Government’s immediate asset write-off incentive is predicted to assist our economic recovery. One of the biggest hurdles in taking advantage of the government’s instant asset write-off is not having the cash upfront for your purchase. The historic cheap money now is the answer. Equipment finance is a solution. Current low interest rates, flexible repayments & residual loan structure creates an affordable lending solution.
What opportunity does the instant asset write-off give your business?
This part of the budget is designed to accelerate investment, increase cash flow, support business, and create more jobs. Struggling business will have better access to credit. The hard-hit hospitality industry could be the first to benefit from this write-off scheme. It not only assists cafes, bars, and restaurants to upgrade with COVID-19 safe equipment but encourages to modernise and glamourise to attract new clientele. Many of these hard-working businesses have made a tremendous effort to survive this economic crisis. However, they may not have the cash reserves to purchase the required equipment they desire. Lending money through asset finance or equipment lending is a cost effective and suitable way to overcome cash flow issues.
How Business Can Benefit
The instant asset write-off scheme is essentially accelerating depreciation to allow immediate claims rather than deductions over several years. For example, many trucks and heavy machinery assets that cost $100K and more are depreciated over a 10-year period. Under these new rules, the full $100K will be written off immediately.
This is a great opportunity for small sub-contractors in the construction industry. The Government has allocated a substantial $14B for infrastructure works. The write-off scheme gives them the ability to upgrade work vehicles and any accompanying equipment.
It’s important to note that the claims are tax refunds NOT REBATES. Most depreciable assets are eligible for this scheme. However, there are a few exceptions. Building and capital work assets are not eligible. Assets located or used predominately overseas along with software development assets will not be accepted for the write-off.
The budget is a powerful confidence booster for the Australian Economy. It will assist businesses to develop and grow, create more jobs and assist with COVID-19 economic recovery.