Instant Asset Write Off Eligibility

Eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used or installed ready for use.

Instant asset write-off can be used for:

  • multiple assets if the cost of each individual asset is less than the relevant threshold
  • new and second-hand assets.

If you are a small business, you will need to apply the simplified depreciation rules to claim the instant asset write-off. It cannot be used for assets that are excluded from those rules.

The instant asset write-off eligibility criteria and threshold have changed over time. You need to check your business’s eligibility and apply the correct threshold amount depending on when the asset was purchased, first used or installed ready for use.

Current temporary tax depreciation incentives -There are currently three temporary tax depreciation incentives available to eligible businesses:

  • Temporary full expensing
  • Increased instant asset write-off
  • Backing business investment

The instant asset write-off does not apply for assets you start to hold, and first use (or have installed ready for use) for a taxable purpose, from 7.30pm (AEDT) on 6 October 2020 to 30 June 2022. You must immediately deduct the business portion of the asset’s cost under temporary full expensing.

If temporary full expensing does not apply or you are not eligible for it, you may still claim the depreciation deduction under instant asset write-off if the asset was:

  • purchased by 31 December 2020, and
  • first used or installed ready for use before 30 June 2021.

For the 2019–20 and 2020–21 income years, eligible businesses may be able to deduct the cost of new depreciating assets at an accelerated rate using the backing business investment – accelerated depreciation rules.

Eligible businesses – Businesses are eligible for the backing business investment – accelerated depreciation deduction if they have an aggregated turnover of less than $500 million in the year they are claiming the deduction. The deduction is available in the 2019–20 and 2020–21 income years.

Eligible assets – To be eligible to apply the accelerated rate of deduction under backing business investment, the depreciating asset must:

  • be new and not previously held by another entity (other than as trading stock)
  • be first held on or after 12 March 2020
  • first used or first installed ready for use for a taxable purpose on or after 12 March 2020 until 30 June 2021
  • not be an asset to which an entity has applied either the temporary full expensing or the instant asset write-off rules

 

There is no limit on the number of eligible assets that you can apply accelerated depreciation to in an income year under backing business investment.

Eligible assets do not include:

  • second-hand depreciating assets
  • some specific Division 40 assets subject to low value and software development pools
  • certain primary production assets (water facilities, fencing, horticultural plants or fodder storage assets), unless you are a small business entity that chooses to apply the simplified depreciation rules to these assets
  • buildings and other capital works for which you can deduct amounts under Division 43
  • Assets that will never be located in Australia OR will not be used principally in Australia for the principal purpose of carrying on a business
  • other specific capital asset and expense deductions
  • assets you were committed to acquiring before 12 March 2020.

There is no limit on the cost of an eligible asset unless it is a passenger vehicle.

Opting out – You can make a choice to opt-out of backing business investment – accelerated depreciation for an asset if you are not using the simplified depreciation rules. The choice can be made on an asset-by-asset basis, and you cannot revoke your choice once it is made for an asset. For most businesses you must make the choice in your tax return OR notify the ATO by the day you lodge your tax return for the income year to which the choice relates.