Instant asset write-off changes and Federal Budget 2023
On 9 May 2023, as part of the 2023–24 Budget the Australian Government announced Instant asset write-off changes, with the ‘temporary full expensing’ measures scrapped and the instant asset write-off threshold slashed to $20,000, from 1 July 2023 until 30 June 2024. Comically, it said this was an improvement for business.
This measure is not yet law.
Small businesses, with aggregated turnover of less than $10 million, will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024.
The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets.
Temporary Full Expensing and Taking Advantage before 1 July 2023
If you want to take advantage of the temporary full expensing measures, in which you can write off the full cost of any asset (other than cars, see below and note there are separate rules for what the ATO considers ‘commercial vehicles’), the asset must be first used or installed ready for use by 30 June.
Assets more than $20,000
Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that.
Exclusions and limits – Car Depreciation limit
A car limit applies to the cost of passenger vehicles.
A car limit applies to the cost of passenger vehicles (except a motorcycle or similar vehicle) designed to carry a load less than one tonne and fewer than 9 passengers.
The one tonne capacity is the maximum load your vehicle can carry, also known as the payload capacity.
The payload capacity is the gross vehicle mass (GVM) as specified on the compliance plate by the manufacturer, reduced by the basic kerb weight of the vehicle.
The basic kerb weight is the weight of the vehicle with a full tank of fuel, oil and coolant together with spare wheel, tools (including jack) and factory-installed options. It does not include the weight of passengers, goods or accessories.
Payload capacity = GVM – basic kerb weight
The car limit does not apply to vehicles modified for use by people with disability.
You cannot claim the excess cost over the car limit under any other depreciation rules.
The depreciable amount is limited to the business portion of the car limit for the relevant income tax year. For example, the car limit is $59,136 for the 2020–21 income tax year. If you use your vehicle for 75% business use, the total you can claim under the instant asset write-off is 75% of $59,136, which equals $44,352.
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