Small Businesses Must Hurry to Beat Instant Asset Write-Off Deadline

Small businesses must act quickly to beat the deadline for the instant asset write-off (IAWO) scheme or face more onerous depreciation rules from 01 July 2023. Once the scheme ends, businesses will need to depreciate any asset over $1,000 (or $100 for larger businesses). This will be a significant burden in terms of time and money, especially for small businesses.

Please keep in mind, you must spend the money to be able to claim a deduction, so think about how this impacts cash flow and if the spend is necessary for your business at this time. Say you purchase and install a business asset for $25K before 30 June 2023, you will be able claim the full amount (depending on business/personal use) for tax depreciation. When you sell the asset, for example, 3 years later for $20K, the whole amount will be assessable as the cost base for tax is $NIL. This is the flip side to the current arrangement.

The instant asset write-off has been available for small businesses since 2015. During the pandemic, the government introduced temporary full expensing for all businesses regardless of size. However, both initiatives are coming to an end. Many business owners hoped these initiatives would be extended, but the new federal government has different priorities.

Small and medium-sized enterprises (SMEs) that do not need to write off assets this financial year should save the depreciation for when it is essential and speak with their advisor. Tax planning is crucial this financial year as supply chain issues may affect businesses' access to the instant asset write-off.

If businesses want to access the instant asset write-off, they must ensure the asset is installed and ready for use by 30 June 2023, or they cannot claim it.

Although initiatives such as the skills and training boost and technology investment boost have been announced, they are unlikely to have the same impact as the instant asset write-off.