Permanent $20,000 Instant Asset Write-Off Gives Small Businesses Greater Planning Certainty
The Federal Government’s decision to permanently legislate the $20,000 instant asset write-off will give eligible small businesses greater certainty when planning equipment purchases, asset upgrades and commercial fit-outs, according to BMT Tax Depreciation.
Around one in four commercial tax depreciation schedules prepared by BMT over the past two years involved businesses eligible for the instant asset write-off, highlighting the measure’s relevance to small business asset purchases and tax depreciation planning.
BMT Chief Executive Officer Bradley Beer said making the threshold permanent would allow business owners to plan investments with greater confidence, rather than waiting to see whether the concession would be extended each year.
“The instant asset write-off has operated on a temporary basis for several years, so many small businesses will already be familiar with the measure,” Mr Beer said.
“Making the threshold permanent gives businesses a greater confidence to plan when to replace assets, upgrade equipment or complete a new fit-out.”
Eligible small businesses with aggregated turnover of less than $10 million can immediately deduct qualifying assets costing less than $20,000. Importantly, the threshold applies to each individual asset rather than the total cost of a purchase or project.
Mr Beer said this distinction was particularly important for commercial projects, where expenditure often includes a mix of assets with different costs and tax treatments.
“A café or restaurant, for example, may purchase refrigerators, cooking equipment, tables, chairs and point-of-sale systems as part of a single fit-out,” he said.
“Some of those assets may qualify for the instant asset write-off, while others may need to be depreciated over time in a small business pool. When the balance of this pool falls below the threshold, it can also be written off.”
Correctly identifying and separating individual assets is essential, as each item may receive different tax treatment.
“Several assets within a fit-out may qualify for the instant asset write-off, while structural works and other expenditure may be treated differently,” he said.
“Correctly identifying each item helps businesses understand the deductions available and remain compliant.”
Mr Beer said that while the permanent threshold removed uncertainty around the rules, businesses still needed to understand how the concession applied in practice.
“Permanency makes planning easier, but the outcome still depends on identifying the individual assets within each purchase or project,” he said.
“A depreciation schedule provides a detailed breakdown of those assets, helping businesses understand the deductions available and improve cash flow.”
Disclaimer: The $20,000 instant asset write-off is currently available on a temporary basis. Legislation to make the threshold permanent has passed Parliament but is not yet law.
