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Stock up on Tools & Equipment at Tax Time!

 

The Australian government has recently increased the instant asset write-off threshold to $30,000. This means that if you’re part of a small to medium business turning over less than $50 million per year, you can claim a tax deduction for assets such as tools, barriers or temporary fencing up to the value of $30,000 until June 2020.

How does it work?

The threshold applies to each item, meaning anything bought as an asset that costs under $30K is eligible. As with any small business expense, you’ll need to work out whether a portion of it could be deemed to be for private use, and subtract that amount. The remaining amount is your taxable proportion and can be claimed in your tax return by providing your tax invoice to your accountant.

When did the threshold change?

The threshold has changed over the last few years, and has been generously increased by the ATO to the current figure of $30,000. Back in 2011 this figure was just $1000, meaning any assets over that amount had to be depreciated on your books over a number of years. Now with the new increased threshold, assets up to $30,000 can be written off in the year they are first used or installed.

The current figure has been active since April this year and will remain current until the 30th June 2020.

What if I’ve already bought tools prior to April?

If you’ve got a tax invoice for tools or equipment that you bought prior to 2nd April 2019, you might still be able to claim the higher threshold. If what you purchased was not ready to be put into service until after that threshold date, then it could be claimable. The ATO states that the asset must be first bought and used, or installed ready-for-use in the year you claim the deduction.

Is it only for new purchases?

Using the simplified depreciation rules, assets costing less than the relevant instant asset write-off threshold are written off in the year they are first used, or installed ready-for-use. This threshold applies to each asset irrespective of whether the asset is purchased new or second-hand.

Is it only for tools?

We’re using tools as a prime example but the threshold applies to anything you’d traditionally deem an asset to your business. This could be temporary fencing, water filled barriers, and things like traffic message boards, powered equipment, ladders, welding kits and more.

Does the threshold include GST, and other costs like freight?

From the ATO:

The cost of an asset includes both the amount you paid for it and any additional amounts you spent on transporting and installing it ready for use. The cost also includes amounts you spent on improving the asset.

If you are registered for GST, you exclude the GST amount you paid on the asset when you calculate your depreciation amounts (and your instant asset write-off threshold is exclusive of any GST). This is because you will claim as a credit the GST paid in your BAS statement for the relevant period.

If you are not registered for GST, you include the GST amount you paid on the asset in your depreciation calculations (and your instant asset write-off threshold is inclusive of any GST).

I’m confused! I need more information.

We recommend you speak to your accountant to check your individual situation or refer to the Australian Taxation Office website for more detailed information.

Disclaimer: This information is provided as an introductory guide only and does not constitute professional advice. Ensure you make your own independent enquiries before deciding if a particular product is right for you. Consult the regulations and standards applicable to your area and check with your workplace health and safety representative for further information. Jaybro does not warrant the accuracy, content, completeness or suitability of the information on this site (or any site owned by the Jaybro Group) for your individual purposes.

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