Tax breaks part of stimulus package

PART of many stimulus packages recently announced by the Federal Government during the COVID-19 pandemic is a dramatic increase in the amount able to be claimed as an instant tax write off.
Tax breaks part of stimulus package Tax breaks part of stimulus package Tax breaks part of stimulus package Tax breaks part of stimulus package Tax breaks part of stimulus package

New tax breaks include a lift in the instant asset write-off amount to $150,000. Picture Mark Saunders.

Mark Saunders

Until 1 July, the instant asset write-off for eligible businesses has been increased from $30,000 to $150,000.

Under the instant asset write-off eligible businesses can:

  • immediately write off the cost of each asset that cost less than the threshold
  • claim a tax deduction for the business portion of the purchase cost in the year the asset is first used or installed ready for use

The instant asset write-off can be used for both new and second-hand assets. Some exclusions and limits apply.

The instant asset write-off eligibility criteria and threshold have changed over time. Anyone looking to utilise the write-off should check the business's eligibility and apply the correct threshold amount.

The Australian Taxation Office (ATO) said eligibility has been expanded to cover businesses with an aggregated turnover of less than $500 million (up from $50 million).

The ATO provided the following as an example of how the new limits can work:

Purchase of a motor vehicle for business purposes - the effect of the car limit for depreciation:

Edward and Edna own and run a small irrigation supplies business. On 27 March 2020 the business purchases a luxury car that is designed to carry passengers, for $80,000. The instant asset write-off threshold at the time they first use the car in the business is $150,000.

The cost of the car for depreciation is limited to the car limit at that time. As the cost of the car is above the $57,581 car cost limit for depreciation, the business can only claim an instant asset write-off of $57,581 for the year ending 30 June 2020. The business can't claim the excess cost of the car under any other depreciation rules.

They also decide to update their work ute and the business purchases a ute for $65,000 on 27 April 2020. The ute isn't designed to carry passengers (and has been set up with all the trade tools in the tray) so the car cost limit for depreciation doesn't apply. The business can claim a full deduction of $65,000 as an instant asset write-off.

Full details of the new asset write off rules can be found here:

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