12 May 2020

How does the $150,000 instant asset write-off apply to you?

UPDATE: THE GOVERNMENT HAS EXTENDED THE END DATE OF THE MEASURE UNTIL 31 DECEMBER 2020**

As part of the temporary COVID-19 stimulus measures, the Federal Government has made the instant asset write-off scheme more generous than ever.

The asset threshold has increased to $150,000, and businesses with aggregated turnover of up to $500m can access the instant asset write-off.

This support measure will provide much needed cashflow to businesses with immediate tax deduction for multiple depreciating assets.

What is the $150,000 instant asset write-off?

It is an immediate deduction from taxable income for the cost of eligible assets. The cost of each asset and deduction can be up to $150,000 – that’s right multiple assets can be claimed.

Businesses with up to $500m of turnover are eligible and second hand OR brand new assets qualify.

Assets must be purchased AND delivered/installed ready for use from 12 March 2020 to 30 June 2020**.

Why should I take advantage of it before 1 July 2020?**

The higher thresholds apply only up to 30 June 2020**.

From 1 July 2020 the threshold reduces to $1,000 and only businesses with less than $10m turnover are eligible.

Second hand assets over $1,000 will no longer qualify for a full cost deduction. And you will miss out on the end of financial year sales.

Example

  • Bob owns a building company, Bob The Builder Pty Ltd.
  • Bob The Builder Pty Ltd purchases a $130,000 (ex. GST) truck for business purposes
  • Under previous the previous scheme, Bob is not able to immediately deduct assets more than $30,000, he would only be able to depreciate it over its useful life
  • Under the new $150,000 instant asset write-off, Bob The Builder Pty Ltd would claim an immediate deduction of $130,000 in the 2019-20 income year
  • At the company tax rate of 27.5%, Bob The Builder Pty Ltd will pay $35,750 less tax ($130,000 x 27.5%)
  • This will improve Bob’s cash flow and help the business withstand and recover from the economic impact of COVID-19.

What if I wanted to finance the purchase?

If you are confident in your cash flow and working capital, lenders are eager to help you. There are products designed for specific asset and equipment types as well as documentation level you are willing to satisfy.

Rates are at historic lows so there has never been a better time to consider asset finance.

What are the rates and fees?

The upfront lender fee is generally $400, we do not charge fees as the lender pays us upon successful settlement.

As a guide to determine the rate, ask yourself these questions:

  1. Have you been in business for 2 years or more?
  2. Does the asset you are buying appeal to the mass market?
  3. Is the asset you are buying brand new and from a dealer?
  4. Do you own property or have a 10-20% deposit?
  5. Have you previously had asset finance with good history?

If the answer is:

  • YES to all – rates start at 3.XX%
  • YES to 2 or less – rates start at 5.XX%
  • NO to all – we may still be able to help

We have managed many asset finance applications and will maximise your chance of approval whilst securing a competitive deal.

For enquires, please contact: