Second opportunity - asset write-off extension

The recent extension of the $150,000 instant asset write-off threshold to 31 December 2020 has given business entities with a turnover of under $500m a second opportunity to access significant tax savings when purchasing equipment. With various Government stimulus measures and existing depreciation concessions available for primary producers, it can be difficult to understand what the tax effect will be for assets purchased in the 2020/21 financial year.

$150,000 Instant Asset Write-off

Broadly speaking, all assets used within the business, that decline in value over time, will be eligible for the instant asset write-off. Businesses can claim an immediate tax deduction for the cost of the asset provided that:  

• The business purchasing the asset has a turnover of less than $500m
• The purchase price is less than $150,000 (GST exclusive).
• The asset is installed and ready for use prior to 31 December 2020
• The asset does not have its own tax treatment

Assets that have their own tax treatment include fodder storage assets, fencing and water facilities.

Backing Business Investment deduction

For those assets costing more than $150,000, businesses can claim an upfront deduction of 50% of the cost of the asset in the year of purchase, provided that:

• The business purchasing the asset has a turnover of less than $500m
• The asset is new and not previously used in operation by another business
• The asset is installed and ready for use prior to 30 June 2021
• The asset does not have its own tax treatment

Existing depreciation rules apply to the remainder of the asset’s cost.

Accelerated Depreciation for Primary Producers

Tax concessions for primary production assets remain in place and will continue to apply after the government stimulus measures cease.

Fodder Storage Assets

A primary producer can deduct a fodder storage asset in the year of purchase irrespective of the cost. A fodder storage asset is defined as an asset that is primarily and principally for the purpose of storing fodder. Examples of fodder storage assets include silos, bins for storing grain & hay sheds. 

Fencing

Expenditure incurred by a primary producer on the construction, installation or acquisition of a fencing asset is immediately deductible in the income year in which it incurred.

Water Facility Expenditure

Capital expenditure incurred by primary production or the construction, installation or acquisition of a water facility is also fully deductible in the year of expenditure for primary producers, such items include dams, pipes and pumps, water tanks & windmills.

As always, before making any capital investment decisions, seek advice from your accountant to ensure you qualify for the above.

HOW CAN RSM HELP?

If you have any questions regarding the asset write-off extension, contact your local RSM office.