The cut-off date for the expanded Instant Asset Write-off (IAWO) is to be extended from the end of this month to 31 December 2020.
Federal Treasurer Josh Frydenberg and Minister for Employment Michaelia Cash announced the extension on Sunday (7 June 2020).
Extension of cut-off to 31 December 2020
The extension recognises that many businesses may not have had sufficient time since mid-March to implement investment decisions made in response to the Government’s 12 March announcement of an expansion to the previous, more modest, IAWO.
Sunday’s announcement says the extension is designed to “support business sticking with investment they had planned, and encouraging them to bring investment forward to support economic growth”.
The popular IAWO of the cost of certain assets for tax purposes was significantly enhanced in March by increasing the asset-cost threshold to $150,000 and expanding eligibility to all businesses with aggregated annual turnover of less than $500 million.
These expansions were to end on 30 June 2020, but will now apply until 31 December 2020. This means the assets purchased must be used or installed ready for use for a taxable purpose on or before 31 December 2020.
It can be implied, but is not clear, from the announcement that the 31 December cut-off date for use or installation, applies also to relevant asset purchases from 12 March, not just from 7 June 2020.
The IAWO is available for the cost of both new and second-hand assets and the higher $150,000 threshold applies on a per-asset basis (allowing immediate tax write-off of multiple assets). You can read further details of the expanded IAWO and the other 12 March announced measures here.
From 1 January 2021, the IAWO asset cost threshold reverts to $1,000 and eligibility reverts to small businesses (turnover less than $10 million).
Overlap with accelerated depreciation measures
There is overlap of the IAWO and accelerated depreciation measures (also announced on 12 March 2020) for new eligible assets costing less than $150,000 purchased and installed between 12 March and 31 December 2020.
For sufficiently tax paying businesses that have this overlap, the IAWO will be the most beneficial option. However, business entities with less postive tax paying positions and who foresee a potential change of ownership will need to consider whether the IAWO or accelerated depreciation will provide the greater present value.
Assistance with implementation
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