From the ATO
The instant asset write-off (IAWO) is now law. Eligible businesses with an aggregated annual turnover of less than $10 million may deduct the full cost of eligible assets costing less than $20,000.
Eligible assets can be new or second-hand. They must be first used or installed and ready for use between 1st July 2023 and 30th June, 2024. The $20,000 threshold will apply on a per-asset basis, so you can instantly write off multiple assets.
The IAWO is one of several depreciation methods available to small businesses. It has been offered under changing conditions since 2011; however, it was suspended when temporary full expensing (TFE) was available. TFE ended on 30th June 2023.
The usual rules for claiming deductions still apply. You can only claim the business portion of the expense, and you need to make sure you have records to prove it. For more information about the instant asset write-off, including eligibility criteria, visit ATO – Instant asset write-off for eligible businesses.
The Current Year 1st July 2024 to 30th June 2025
The recent Budget also announced that the measure would continue into this year. However, once again, it is not yet law, and the announcement is subject to parliament’s process.
What is Instant Asset Write-Off?
Instant Asset Write-Off allows eligible small businesses with an annual turnover of less than $10 million to immediately deduct the full cost of assets that cost less than $20,000 rather than depreciating them over several years. This applies to both new and second-hand assets first used or installed and ready for use between 1st July 2023 and 30th June 2024.
Businesses can write off multiple assets, provided each one is under the $20,000 threshold. The deduction is only for the portion of the asset used for business purposes, and proper records must be maintained to prove the purchase and business use. This write-off provides immediate tax relief, helping to reduce taxable income for eligible businesses.
The Role of Your Bookkeeper
Your Bookkeeper plays a crucial role in managing your business’s finances, particularly in tracking all asset purchases and installations. They ensure that each asset is accurately recorded with precise purchase dates and costs. Collaborating closely with your Tax Agent, your Bookkeeper monitors each asset’s cost to ensure it falls below the relevant threshold for the instant asset write-off (IAWO).
At the end of the financial year, your Bookkeeper will highlight any equipment purchases to your Tax Agent. This step is essential to ensure that all eligible assets are correctly claimed in your tax return, maximising your business’s potential benefits from the IAWO. Throughout the year, your Bookkeeper maintains thorough documentation and accurate records, facilitating this process and ensuring compliance and optimal tax outcomes for your business.
If you are unsure if your Bookkeeper is undertaking these important tasks within your business, have a discussion with them and explore the value of having your Bookkeeper keep your asset purchases and important asset records up to date and gaining the maximum results for your business.
