In the 2015 budget, the value of assets that qualified for instant write off tax deduction for small business increased from $1,000 to $20,000. With that, larger assets including many vehicles no longer require the depreciation method of calculating deductions, but you might need to hurry to capitalise.
Small business owners are still coming to terms with changes to the way businesses depreciate the cost of vehicles and their associated expenses. The first round of changes was introduced at the May 2015 federal budget and the rules were extended at this year’s budget, but not yet past the end of June.
At the 2015 May budget, the immediate write off tax deduction for low-cost assets for small business entities was extended from business expenses that cost less than $1,000 to assets costing less than $20,000.
“The previous low-cost asset write off threshold was very useful for immediately claiming small items of equipment and furniture for tax purposes. But very few work vehicles cost less than $1,000, so this incentive was of much more limited use to many businesses before the new changes were introduced,” said HLB Mann Judd tax partner Peter Bembrick.
But that’s no longer the case, with the introduction of the more generous $20,000 threshold.
“The higher threshold was originally introduced for a three year period, that is, for assets acquired during income years ending on or after 12 May 2015 and on or before 30 June 2017,” Bembrick said.
The instant asset write off concession allows an immediate tax deduction in the year of the asset purchase, instead of the usual approach of claiming tax depreciation deductions over the life of the asset.