Will the $20,000 Small Business Tax Write-Off Continue?

The $20,000 Small Business tax write off introduced in 2015 by then-treasurer Joe Hockey is due to come to an end on 30 June 2018.

The write off measure enables small businesses with a turn over of up to $10 million a year to instantly claim tax deductions on all equipment purchases that are worth less than $20,000.

Whilst there is speculation that Treasurer Scott Morrison may extend the Government’s instant asset write-off in the up coming Federal Budget, there are no guarantees. If this measure doesn’t continue, the tax write-off will decrease to $1,000 from 1 July 2018.

So what does it mean for your small business right now?

If you buy a physical asset that costs less than $20,000 (new or second hand), you are then able to immediately deduct the business portion in your next tax return:

  • If the asset was first used or installed ready for use in the income year you are claiming it in
  • If you have a turnover less than $10 million
  • If you are claiming equipment, vehicles, tools and electronics (such as computers and phones)

The following assets are excluded from the instant deduction

  • Assets that are leased out for more than half of the time on a depreciating asset lease
  • Capital works
  • Software
  • Horticultural plants, including grapevines – these are covered by other specialised deductions

Any assets that cost $20,000 or more cannot be immediately deducted. They will continue to be deducted over time using the general small business rules for deductions. Whilst you might be tempted to try double dipping by claiming the initial write off and then the depreciating asset in subsequent years, forget it, that tax office will be clamping down on this.

If you have any questions, please don’t hesitate to speak to us or your accountant.