What’s Changed with the Instant Asset Tax Write-off?

As part of the Federal Budget released in May, the government announced that it would be extending ‘temporary full expensing’ until 2023, giving COVID-fatigued businesses the confidence and kickback needed to get the new financial year off to a solid start.

If you or your SME clients have been considering investing in a new computer, vehicle or specific tool to expand operations, read on to find out how it works and how you both could benefit.

What is the ‘temporary full expensing’ scheme?

Initially introduced in 2020, the latest 12-month extension to the ‘temporary full expensing’ scheme means any Australian business with an annual total income of up to $5 billion— or 99% of them— can take advantage, deducting the business portion of eligible depreciable assets used or installed by 30 June 2023.

There is no purchasing limit on assets.

Temporary full expensing also applies to eligible second-hand depreciating assets for businesses with an aggregated turnover of less than $50 million.

You and your clients can claim expenses on equipment or assets used for business-related purposes, including vehicles, tools, machinery and office technology.

What should you know about the instant asset tax write-off?

• Eligible new assets must be first used or installed by 30 June 2023, a 12-month extension
• Businesses with an aggregated turnover of up to $5 billion are now eligible, up from the previous $500 million turnover requirement
• There is no limit on the value of the asset purchased; it was previously $150,000

How does the instant asset tax write-off benefit you and your clients?

The scheme benefits businesses because it allows them to claim the full tax deduction of an asset upfront, rather than deducting depreciating costs over the coming years. This will ultimately reduce the amount of tax they have to pay and increase cash flow.

The point of the scheme is to encourage business owners to spend and invest now, injecting cash into the economy, creating jobs and boosting consumer confidence.

According to the government, tax incentives like this one have been successful, with investment in machinery and equipment increasing at the fastest quarterly rate in nearly seven years in the December quarter.

Asset finance brokers, keep note, this means big business opportunities for you.

Off the back of the budget announcement, we suggest brokers reach out to new and existing clients to let them know about the changes; sharing clear and timely information with clients is yet another way of demonstrating your value and marketing your business.