Find out what you can claim and if you’re eligible!
Back in March the Federal Government announced their first range of stimulus measures to keep the economy moving through COVID-19. One of those was the increase of the threshold for the instant asset write-off (IAWO) from $30,000 to $150,000. That’s a massive jump!
But remember this is not a refund or cash bonus, this is a tax deduction brought forward that will reduce your tax bill – of course only if you’re likely to be getting one! There’s also something else important to note, passenger cars and a few other items do not qualify for the full $150k amount!
So let’s take a closer look. Remember, if you’re contemplating a purchase and want to talk it through so you can have a pre-approval and negotiate hard, just give us a call and we can get you into the best negotiating position.
Do you qualify:
Your business must have a turnover of less than $500 million a year and your items were originally required to be purchased and first used or installed ready for use prior to June 30, 2020 – however, this is now extended to December 31, 2020 (which is now extended to June 30, 2021). It’s not retrospective so does not apply prior to March 12, 2020 when the benefit was announced.
What you can claim:
Utes, vans, trucks, and machinery are all eligible but they MUST be under $150,000 each. If it’s $150,100 you’ll need to negotiate harder to get it under the $150k amount. You can also get the IAWO multiple times – so three trucks up to $450,000. The main thing to remember they must be under $150k each and that cannot include the trade-in. The item can be new or used.
You can claim a passenger car but it can only be up to $57,581. Again if it’s $1 over, it won’t be eligible.
What you can’t claim:
Ultimately your tax accountant will provide advice on this, but while you’re here, this is what’s not allowable.
assets that are leased out, or expected to be leased out, for more than 50% of the time on a depreciating asset lease;
assets allocated to a low-value assets pool;
horticultural plants including grapevines;
software allocated to a software development pool (but not other software); and
assets eligible for capital works deductions.
Other options of benefits:
Ok so you might want to buy something that is more than the threshold – if this is the case you can take advantage of the governments accelerated depreciation incentive which will allow you to write off 57.5% of the value for this 2019/2020 year instead of 15% – that’s a pretty good saving as long as your business turns over less than $10m. If it turns over more than $10m and up to $500m (you may not be reading this), the amount is 50% instead of 57.5%. With the accelerated depreciation incentive, it applies only to new machinery and vehicles.
Also remember, that just because it’s been extended until December doesn’t mean you should procrastinate. A lot of production of equipment (including vehicles) have been held up due to COVID, so it may take 3 months to arrive once you order it.
So that’s the rundown.
Please note that this should not be taken as financial advice. We would normally recommend a chat with us as well as a chat with your accountant to discuss your specific situation and setup the most beneficial solution from there.