The 2024/2025 Federal Budget has arrived and small business owners will be welcoming news that the Instant Asset Write Off scheme has been continued for another financial year.
The extension of the scheme will bring a sigh of relief to small business owners according to David Rosenthal of Retinue Accounting.
“Since it was first introduced the Instant Asset Write-Off has become an invaluable deduction for small businesses, and it’s great news that it will be continuing,” he said. “By allowing businesses to immediately deduct the cost of eligible assets, it offers significant cash flow benefits and encourages people to re-invest in their businesses.”
The scheme allows businesses to claim an immediate tax deduction for the full cost of eligible assets up to $20,000 in the year that they are first used or installed ready for use. Let’s take a look at how the scheme will work for the 2024/2025 financial year.
To qualify, a business must have an aggregated turnover of less than $10m to immediately deduct the full cost of eligible assets up to $20,000. The asset must be first used or installed ready for use for a taxable purpose between 1 July 2024 and 30 June 2025.
The $20,000 threshold applies on a per asset basis, so small businesses can instantly write off multiple assets, something that they should use to their advantage.
“One of the main benefits of the Instant Asset Write-Off is that it can be claimed multiple times, it doesn’t need to be limited to one asset,” Rosenthal says. “A good example would be a commercial kitchen which would require purchasing a number of high-value items that meet the deduction criteria. Rather than purchasing those new appliances in a single transaction, potentially you could purchase them all separately and claim the Instant Asset Write-Off multiple times.”
The eligible and non-eligible assets for 2024/2025 will remain the same as the current financial year, and include:
· Vehicles (subject to load and passenger limits)
· Machinery and Equipment
· Computers and Laptops
· Office Furniture and Fittings
· Tools and Machinery
· Technology Hardware (printers, scanners monitors etc)
· Solar Panels / Energy Efficient Equipment
· Kitchen Equipment (restaurants and cafes)
· Agricultural Machinery and Equipment
· Manufacturing Equipment
· Capital improvements to buildings
· Assets costing $20,000 or more, or are not installed ready for use for a taxable purpose before 30 June 2025
· Intangible Assets
· Second-hand assets over $20,000
· Assets not used for taxable purposes
While the instant asset write off can be a useful tax-saving tool, Rosenthal cautions against business owners buying assets that they don’t need solely to reduce tax.
“The scheme can be helpful in reducing tax, but in order to buy those eligible assets in the first place business owners need to have the cash. And so they have to ask themselves: is my main goal to save tax, or do I need to preserve my cash flow? Answering this question can help decide whether your business can really afford that shiny new asset.”
Other considerations include the timeframe for receiving, installing and using any assets you intent to claim under the scheme.
“Too often we see business owners who want to buy larger assets like a new car or major appliance for the business and deduct it under the instant asset write off. But they forget that the purchase needs to be received, installed and ready for use prior to June 30. So you may have to factor in things like financing, waitlisting and installation timeframes. Plan ahead and don’t leave your purchases too late.”
Need some guidance on how to use the Instant Asset Write Off for 2024/2025? Get in touch with Retinue Accounting to book your free initial consultation.
*Retinue’s (ABN 66 658 618 449) payroll service includes the processing of hours and wages rates provided by you. We do not determine award rates for your employees or provide advice on the correct employment status of your employees. It is your responsibility to ensure that your employees are paid correctly and we recommend obtaining advice from specialised employment relations experts.
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