What is the instant asset write-off scheme?
The federal government’s instant asset write-off scheme allows businesses with a turnover of less than $500 million to claim an immediate tax deduction of up to $150,000 on assets purchased this year. Assets that are eligible for dedication include vehicles, tools, office equipment and the entire cost of a solar installation.
How has the instant asset write-off changed recently?
The extension of the instant asset scheme until the end of the year is part of the Australian government’s response to the coronavirus pandemic. The recent changes have strengthened the incentive with the hope it will help Australian businesses weather the economic impact of the virus.
Until recently, the maximum threshold for claims was just $30,000, which has now increased five-fold to $150,000. On top of that, more businesses have become eligible for the program. The government has increased the turnover limit from $50 million to $500 million. Overall, the government has widened the reach of the scheme and massively increased the benefits for both big and small business owners.
If you are looking to write-off the value of a vehicle, be aware that a maximum limit of $59,136 still applies for the 2020/2021 tax year. However, no such restriction applies to commercial solar installations. Therefore, on a $100,000 system, you would be able to write off the full amount under the extended program.
Does the instant write-off apply per asset purchased?
No, the total amount that you can claim using the instant asset write-off incentive is $150,000. This means you can buy multiple business assets up to this value and receive the tax relief, but you must not exceed it.
What about assets that are used personally?
The incentive can still be used for business assets that are also used personally. However, you must only write-off the percentage that is used for business operations. If for example, you bought an item of machinery for $100,000 that you use 80% of the time for commercial purposes and the other 20% is for personal use, you would only be able to write-off $80,000.
Are you eligible for the instant asset write-off scheme?
There are a few factors that affect eligibility for the instant asset write-off incentive. The first being the aggregated turnover of all your associated business, which must be under $500 million. Second is the date of purchase, installation, and first use – you must have any asset installed and ready to use before 31st December 2020 to write it off under the scheme. Lastly, the cost of the assets must fall under the newly increased $150,000 limit.
For items purchased before the increase and extension, the rules vary slightly. We recommend taking a look at the various thresholds and limits provided by the government.
What does instant asset write-off mean for your business?
From the 1st January 2021, benefits increased benefits of the incentive evaporate and sink lower than pre-coronavirus levels. The aggregated turnover limit drops to less than $10 million, and the write off threshold is a mere $1000. It’s essential to act quick and reap the full benefits that are on offer while they last.
Join the thousands of businesses who have already taken advantage of the benefits that solar has to offer. The industry continues its meteoric rise in popularity with Australia’s solar uptake seeing 35% growth in 2019 alone.
With the extended instant asset write-off scheme absorbing the full cost of the initial solar installation, there hasn’t been a better time to reap the benefits of solar.
Contact Solaray today. Our experts can discuss the best options available for your business to leverage the government’s instant asset write-off extension and help your company cut its energy costs over the long term.