How to get an instant tax write-off for your business loan

How to get an instant tax write-off for new business assets

  • The instant asset write-off has been extended to 30 June 2020.
  • You can now make a claim on business assets worth up to $30,000 – the scheme will help Aussie SMBs save around $700 million collectively.
  • Don’t have the liquid cash to purchase assets? Financing could be the ideal solution.

For a couple of years now, small business owners have been given the opportunity to claim an instant tax write-off on any assets under a set amount. This means owners can upgrade their essential equipment, invest in new technologies and bolster their shopfront to get ahead of the competition.

But as all good things tend to do, the instant asset write-off was set to come to an end – until the Federal Government announced an extension. And not only that, but a boost to the write-off threshold.

That means you can now take advantage of the government’s instant asset tax write-off until the end of the next financial year (30 June 2020), and you can claim on assets up to $30,000.

The scheme is also more inclusive than it’s ever been. Whereas previously it was only available to businesses with an annual turnover less than $10 million, that barrier has been raised to any business earning up to $50 million – meaning medium-sized operations can also take advantage of this tax write-off.

So how can you leverage the true power of this scheme to boost your business? Let’s dive into the specifics so you can update your equipment, save money and help keep your company operating smoothly.

Business man looking at pieces of paper

The instant asset write-off – explained

You might be asking yourself, ”What’s the point of this scheme for business owners?”. Essentially, if you were looking to buy assets for your small business that would immediately start to depreciate, you might not believe that claiming on its depreciating value would be worth it, if it had to be spread over several years.

What the instant asset write-off does is allow you to claim the entire expense in the financial year in which it was purchased, rather than only being able to claim part of that original expense over multiple years – as it continues to depreciate in value.

That could be a real lifeline for small business owners with tight margins, and especially those who constantly need to upgrade their assets.

Who is eligible?

The 2019 Federal Budget was something of a boon for many Australian business owners, not least for the instant asset write-off extension which is set to help small business owners save around $700 million collectively.

Want to get in on the action? Here’s what you need to know about your eligibility:

  • You must be recognised as a small business by the ATO. Sorry, sole traders and freelancers – that means you may not be able to take advantage unless you qualify under certain conditions. Speak to your financial advisor about whether this is a wise path to take in your circumstances.

  • You’ve bought an asset for your business that cost up to $30,000. NOTE: If you buy an asset with an individual price tag of more than $30,000 you will need to add it to your small business asset ‘pool’. You will be able to claim a 15% deduction in the first year it’s installed and ready for use, and 30% in each subsequent year.

  • You must have purchased the asset in the same financial year you are making the claim.

  • You must have first used or installed the asset and had it installed and ready for use after 7.30pm on 2 April 2019. Assets purchased earlier in the year will qualify for a $25,000 write-off (29 January 2019 to 2 April 2019) or a $20,000 write-off (before 29 January 2019).

  • Your asset class must not be exempt or considered an excluded asset. The ATO outlines these as:

    • assets that are leased out, or expected to be leased out, for more than 50% of the time on a depreciating asset lease.

    • assets you allocated to a low-value pool before using the simplified depreciation rules.

    • horticultural plants including grapevines.

    • software allocated to a software development pool (but not other software).

    • capital works, e.g. building and structural improvements.

Remember that this scheme isn’t restricted to new assets. You can still take advantage when you buy a business asset that’s second-hand – which can mean you save even more money in the short term.

Person using a calculator and laptop simultaneously

What does it mean for your business?

The bottom line is this: the instant asset write-off can help reduce the amount of tax your business has to pay for the upcoming tax season.

So if you’re a small business and you need to purchase new (or second-hand) assets with an individual cost of up to $30,000 to help your company continue operating, you can do so while claiming the entire deduction for that asset in the same income year as it was purchased, installed and ready for use.

This deduction is then able to be claimed on your business’s annual tax return for that income year.

Here’s what you can claim on

What you decide to invest in depends entirely on your current circumstances, your business type and the industry within which you operate. However, there are a number of common business-related assets that you could take advantage of with the instant write-off, such as:

  • Vehicles

  • Office furniture

  • Tools

  • Computers

  • Printers

  • Software

  • Machinery

So long as the assets individually cost less than $30,000 you can make an instant write-off claim.

Consider a few examples of businesses that are taking advantage of the write-off. Coastal Transport Services is a small business that just recently tipped over the $10 million revenue mark. In previous years, this would have made them ineligible to receive the write-off because they were making too much money, but now that the threshold has been raised to $50 million the founder is looking to invest in new computers and printers for their main office.

Similarly, the co-founder of Tentworld is keeping a careful eye on his company’s revenue this financial year. If they are able to stay within the $50 million threshold, he says the business will be able to see a much faster return on investment of their recent capital purchases, as well as make future purchases easier and more appealing to take up.

Couple using calculator while looking at documents

You can use finance to purchase much-needed assets

While this is all good and well for moneyed-up companies like Tentworld, what about the majority of small businesses in Australia that have to carefully manage their budgets all year round just to make a profit – not to mention deal with the uncertainty of seasonal fluctuations, such as in retail?

The solution could be as simple as financing. If you want to take advantage of the instant asset write-off but don’t have the liquid funds to pay for them out of your own (business) pocket, Valiant Finance can help.

Valiant Finance can help you compare over 70 financial lenders as well as hundreds of loan products. That means you’ll be able to find a financing solution that meets your unique business needs and helps you purchase all the necessary assets to keep you afloat.

Make the most of it while it lasts

If you haven’t been making the most of the instant asset write-off up to this point, don’t worry – you’re not alone. In fact, the ATO revealed that the average amount claimed in 2016-17 was just $11,000. More than that, a whopping 78% of small businesses in Australia didn’t even use the government scheme for the financial year ending in 2017.

The scheme is there for a reason – and the newly elected government has reiterated that it won’t make it permanent. That means you only have until the end of the 2019-20 financial year to take advantage of an instant write-off on assets up to $30,000 in value.

If you think some new computers or office furniture, an upgrade on your work vehicle, or some new tools could help take your business to the next level, don’t miss out this year – use the write-off scheme to help revitalise your operations so you can hit the ground running in the new financial year.

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