What is the instant asset write-off scheme?

The “Instant Asset Write-Off” is a business tax incentive, first introduced by the Australian Government in 2011 to stimulate the economy. encourage businesses The idea was to encourage businesses  to invest in assets and equipment, by allowing them to then ‘write off’ a portion of the asset purchase price at tax time.

Since then, the incentive has evolved for the better. In fact, eligible businesses can now write off the full amount of (just about) any asset purchased in the current year. 

“The instant asset write-off is a strong incentive for business owners to purchase the tools and equipment they need to solidify or grow their business operations,” says Sarah Cook, Managing Director at Elev8 Business Services.

“If you need to upgrade your equipment, from IT hardware to company vehicles, this is a fantastic way to  get you what you need now and claim the full cost as a tax deduction,” she says. 

Is my business eligible? 

As it stands, the rules regarding the instant asset write-off require that you’re an active Australian business with an Australian Business Number (ABN). This includes sole traders, companies, partnerships, and trusts. So if you fit that bill, you’re part way there.

From here, your eligibility depends on:

  • Your turnover (must be under $5 billion – let’s face it, that’s almost every Aussie business)
  • The date you purchased the asset (must be the same financial year as your claim)
  • When the asset for first used or installed (must be the same financial year as your claim)
  • The cost of the asset; for some categories, like ‘expensive cars’, limits are in place

What assets are included in the write-off?

Almost any asset used for business purposes can be claimed against the instant asset write-off incentive. In fact, you can claim multiple assets (provided the cost of each is less than any relevant threshold) as well as second-hand goods (where your business turns over less than $50 million per year). Here are some of the most common assets we see our clients claim:

  • Motor vehicles 
  • Tools, machinery and equipment 
  • IT hardware and technology
  • Office furniture and fixtures (includes solar systems & air-conditioning)

Of course, there are some exclusions, such as:

  • Assets used for research and development
  • Capital works such as buildings or structural improvements
  • Assets that are leased out, or located overseas
  • Some primary productions assets (like fencing and water facilities) 

Expensive Cars

If you’re spending more than $60,733 on a car, the government considers this ‘expensive’ and as such, will only allow you to write-off an amount up to this limit. In saying that, commercial vehicles like vans, buses and trucks purchased for business purposes can be fully written-off, regardless of their cost. This is good news for tradies for example, who may be in need of a ute with a carrying capacity over one tonne;  these are not considered ‘cars’ but ‘commercial vehicles’. 

Personal use

Keep in mind that any deduction you claim under the instant asset write-off incentive, must be apportioned if you use the asset for both private and business purchases. For example, if you buy a car for $29,000 and use it for business only 60% of the time, you can only claim a deduction for $17,500 (i.e. 60% of purchase price). 

How do I claim the instant asset write-off?

Claims can be made through your business tax return, lodged for the year ending 30 June 2022. You’ll need documentation to prove your purchase as well as any relevant installation / first-use dates. It’s always best to chat with your accountant to ensure you’re getting the full benefits of this incentive.

The bottom line.

The instant asset write-off is a fantastic incentive for eligible businesses to buy the assets or equipment they need before June 30, and claim the full cost as a tax deduction. 

Contact Elev8 Business Services or call 1300 588 527 to ask us about your eligibility for the Instant Asset Write-Off today.