As the cut-off date for the instant asset write-off program approaches on June 30, 2023, many small to medium-sized enterprises (SMEs) are feeling the pressure to take advantage of the program before it ends.

The instant asset write-off (IAW) initiative has been a staple of the Australian small business landscape since 2015. This program has allowed businesses to immediately deduct the cost of asset purchases under a certain threshold, making it easier for SMEs to invest in their businesses and stay competitive. However, with the program ending soon, businesses may not be aware of the long-term implications and the extra red tape that comes with it.

However, in response to the COVID-19 pandemic, the Australian Federal Government introduced temporary full expensing as part of its economic rescue package. This measure was available to businesses of all sizes and removed the size limits on asset purchases that existed under the IAW program. This initiative has provided businesses with a much-needed boost during a challenging period, allowing them to invest in their growth and upgrade equipment.

From July 1, 2023, small business entities with an aggregated turnover below $10 million will have to depreciate any assets they purchase worth more than $1,000 over the effective life of the asset.

Instant tax write-offs.

Eligible businesses are still able to deduct the full cost of eligible assets of any value (or improvements to existing assets) if they are purchased up to and including 30 June 2023. Businesses must ensure that the asset is installed and ready for use by June 30, 2023, to claim the write-off.

In simple terms, to be eligible you must be in business and have an aggregated turnover of less than$5 billion, and the asset itself must be principally used in Australia, and first held and used for ‘a taxable purpose’, after 6 October 2020 and on or before 30 June 2023.

The popular scheme, which has enabled businesses to claim immediate tax deductions for qualifying asset purchases, is coming to an end, leaving many SMEs scrambling to beat the deadline. Businesses don’t need to write off assets this financial year and should consider saving their depreciation for when it’s needed. It’s also important to note that supply chain issues may affect businesses’ ability to access the instant asset write-off.

Save your asset write-off if you don’t need it this financial year

You should consider whether to use the instant asset write-off (IAW) program this financial year. You should seek professional advice and considering business results before deciding to claim the deduction to reduce tax bills. If a business doesn’t need the deduction, it’s better to save it for when it’s needed. It is important to ensure assets purchased under the IAW program are installed and ready for use by June 30, 2023, to be eligible for the deduction.

Sectors relying on physical assets, such as agriculture, mining, and construction, will be the most heavily impacted by the ending of the IAW program. Although the government has announced new initiatives, such as a skills and training boost and technology investment boost, they may not have the same generic application as the IAW program.

The new 20% uplift deduction for businesses spending on skills training and digitization is only available to businesses with aggregated turnover below $50 million. It is also only available until June 30, 2024, and only for training conducted with registered training organizations. Moreover, it will be inconsistently beneficial across sectors, as learning in some sectors, such as agriculture, is often on the job rather than through formal accredited courses.

If you are unsure of whether you should purchase assets pre-30 June or post 30 June 2023 based on your current circumstances, or have any questions contact us to discuss.

How can we help?

If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email –  or arrange a time for a meeting so we can discuss your requirements in more detail.

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