Instant Asset Write-Off for Small Business.
Mintax assists property investors benefit from the Instant Asset Write-Off for Small Businesses in the 2024/25 Australian Tax Year.
For small business owners, tax time can be stressful, especially when it comes to understanding how to take full advantage of deductions and exemptions. One such opportunity is the Instant Asset Write-Off (IAWO), a valuable tax concession available to businesses that meet certain criteria.
What is the Instant Asset Write-Off (IAWO)?
The Instant Asset Write-Off allows eligible small businesses to immediately deduct the cost of eligible assets in the year they are purchased, rather than depreciating the asset over several years. This can provide a significant tax benefit, particularly for businesses investing in new equipment or vehicles.
Why you should understand the IAWO rules
Mintax was engaged to determine the IAWO benefits for an eligible business purchase in August 2024. There was no freehold contained in the purchase price of $2.9M, however the purchase included a number of eligible second-hand assets. By applying the current IAWO rules, Mintax uncovered a first-year tax deduction for the client in excess of $442,000.
1. Eligibility Criteria
To qualify for the Instant Asset Write-Off, your business must be a small business entity. The Australian Taxation Office (ATO) defines a small business as one with an aggregated turnover of less than $10 million. This threshold applies across various business structures, including sole traders, partnerships, companies, and trusts.
2. Eligible Assets
The types of assets that are eligible for the write-off include most tangible capital items, such as:
Machinery
Vehicles
Computers
Furniture
Tools and equipment
Leasehold improvements
Properties or businesses purchased during this period most likely contain second hand assets that are eligible for the IAWO, Mintax is qualified to identify and allocate costs to these assets. Assets that are not eligible typically include intangible items like intellectual property or goodwill.
3. Cost Threshold
For the 2024/25 year, small businesses can write off assets with a cost of up to $20,000. This means that businesses can purchase individual items worth less than this amount and immediately claim the full deduction. If your asset exceeds this threshold, it can still be depreciated using the regular depreciation method.
It’s important to note that this is a per asset basis—so businesses can purchase multiple items under the $20,000 threshold and write each one off separately.
4. Timing and Purchase Dates
The Instant Asset Write-Off applies to assets purchased and first used, or installed ready for use, between July 1, 2024, and June 30, 2025. Keep in mind that for an asset to be eligible, it must be used for business purposes, so personal use items don’t qualify.
5. Other Considerations
Second-hand Assets: The Instant Asset Write-Off is not limited to new assets. You can also claim a deduction for second-hand assets, provided they meet the other criteria.
Changes in Legislation: Always check the latest updates from the ATO, as the rules can change. Past years have seen adjustments to the threshold, so it’s crucial to stay informed.
Key Takeaways for Small Businesses
The IAWO is available to small businesses with an aggregated turnover of less than $10 million.
You can write off assets costing up to $20,000 per item, which applies to both new and second-hand assets.
The asset must be used for business purposes and must be purchased and used (or installed) between July 1, 2024, and June 30, 2025.
It can help your business reduce taxable income, improve cash flow, and encourage investment in assets that support growth.
Final Thoughts
The Instant Asset Write-Off is a fantastic tool for small businesses, offering immediate financial benefits and encouraging investment in your business. Before making any large purchases, make sure to consult your accountant or tax advisor to ensure the asset qualifies and you’re maximizing your tax benefits.
Mintax can assist in keeping you informed about the rules and guidelines for the 2024/25 financial year, you can use the Instant Asset Write-Off to boost your business’s financial health and invest in the assets that will drive its future growth.