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Instant write-off for small business assets under $20,000: how does it work?

Australian small businesses have been given 12 more months to take advantage of the federal government’s instant asset write-off scheme.

Announced as part of the 2018 federal budget, the popular scheme will be now expire on June 30, 2019, instead of June 30 this year.

The scheme allows small businesses to claim immediate deductions for asset purchases up to the value of $20,000. The assets must be ready for use by June 30, 2019.

But how does it work?Don't really understand what the $20,000 instant asset write-off is all about? You’re far from alone – with research suggesting up to two-thirds of businesses are underutilising this tax deduction.

Following a national survey, it was revealed that 78 per cent of SMEs don’t fully understand what the tax break entails.

A major problem is that just one in ten business owners could correctly identify items that can be claimed as an asset write-off.

Many small business owners relegate tax to the ‘too hard’ basket and take little interest in tax matters. However, being more proactive and spending time on understanding the opportunities and overcoming their pain points, will benefit their business in the long run.

Basically any small business with turnover of less than $2,000,000 can purchase assets up to the value of $20,000 and get an immediate tax deduction for them rather than having to write them down over the following years.

In addition, assets valued at $20,000 or more can continue to be placed in the small business simplified depreciation pool and depreciated at 15 percent in the first income year and 30 percent thereafter.

What does ‘instant’ mean in this case?

 Sadly, it doesn’t mean that you will get the cash back from the ATO straight away. According to business.gov.au, “it means that you can reduce your taxable income, and your tax payable, in the financial year that you bought and installed them.”

So what can you claim an instant deduction for?

Generally speaking, the deduction is primarily intended for physical assets. Equipment, vehicles, tools and electronics (such as computers and phones) can all be claimed as part of the scheme. There is also no limit to how many assets you can claim the deduction for. However, each one must cost less than $20,000.

It’s important to note that the deduction only applies to assets used for business purposes. If an asset – for example a computer – is split between personal and business use, you can only claim the deduction on the portion that is used for business.

What assets are excluded from the instant deduction?

According to the ATO website, the following are excluded from the instant deduction scheme:

• Assets that are leased out for more than half of the time on a depreciating asset lease

• Assets already allocated to a low-value pool

• Horticultural plants, including grapevines – these are covered by specialised deductions

• Capital works

• Software

Don't claim depreciation!

 You may be tempted to try and double dip by claiming the initial write-off and then depreciating the asset in subsequent tax years, but this is a no-no the tax office will likely clamp down on in this and future tax years.

Essentially, the write-off enables you to claim the depreciation deductions on the life of that asset in one go up-front, therefore it can't be repeated in future years.

In any small business, cash flow is the number one concern. These measures essentially mean that a taxpayer can bring forward deductions where they wouldn’t otherwise have been able to do so.


This tax concession is ideal for those businesses that were planning to purchase assets anyway or have a real business need to update equipment. If it can improve your bottom line (net profit) then look at taking advantage of the opportunity.


This is not a grant or allowance, and you should not rush out to buy any asset before checking with your accountant.If your business is not making a profit, then a tax deduction is of no use to you.

If your business is expected to make profit next year or the year after, then you may better off waiting to use the deduction in those tax years.

Don’t take on unnecessary debt just chasing a tax deduction. Interest rates are at 40-year lows but will not stay here long term.

Beware of the definition of “small business,” especially if you are part of a group of companies. In order to qualify for these concessions, businesses must align with the Australian Taxation Office (ATO) definition of a small business, which is an individual, partnership, trust or company with an aggregated turnover of less than two million dollars. An aggregated turnover is the annual turnover of any business that an individual is connected or associated with.

If used wisely, the instant deduction can be a real benefit to profitable small businesses that were planning on purchasing assets anyway.

Date Published: 13 June 2018