Small businesses are being urged to act fast to take advantage of the instant asset write-off scheme before it expires on 30 June 2023.
Temporary full expensing (TFE for short), which has been in place since 2015, allows businesses with a turnover of less than $50 million to immediately deduct the full value of any eligible assets purchased and installed before the cut-off date, rather than depreciating the cost over several years. However, after the scheme ends, businesses will need to depreciate any asset over $1,000, which could lead to significant red tape and expenses.
What this means for you
Essentially, the looming deadline means that if you are looking to purchase a business asset you need to move quick. Let's look at an example below:
EXAMPLE: Assume you ordered a new piece of equipment for your business which is due to arrive in June 2023. The cost of the machine is $800,000 and you are trading your existing machine for $500,000. If it arrives in June 2023 and is delivered to your business, then the next $300,000 changeover will be a tax deduction in the 2022/23 financial year.
But if delivery is delayed until July 2023, then not only do you miss out on the $300,00 tax deduction in 2022/23, but the tax implications of the changeover in 2023/24 are less than ideal.
What assets are included in the scheme?
Items that are included in the scheme are typically depreciating assets bought for the business, which could include:
- fixtures and fittings (such as shop or cafe fit-outs)
- technology, such as laptops, computers, EFTPOS systems and security equipment
- tools, plant and equipment
- office furniture
- motor vehicles such as utes, delivery vans and most cars (deductions for these are capped at a certain limit each financial year – $64,741 in 2022/23)
- motorbikes
- solar systems.
Conclusion
If you are considering taking advantage of the instant asset write-off scheme before it expires on 30 June 2023, we urge you to act quickly. It is also important to remember that it is not only the purchase that has to occur in this financial year, but also delivery of the item to ensure you maximise the write-off in this financial year.
We are here to help! If you have any queries regarding the instant asset-write off scheme, please contact your advisor to discuss.
