After its introduction in 2011, the instant asset write-off underwent several extensions and was further extended during the COVID period.
In the 2021 Federal Budget the instant asset write-off was extended until 30 June 2023, however this recently ended and recommenced under a new regime. Accordingly, From 1 July 2023, small businesses with an aggregated annual turnover of less than $10 million can continue to immediately deduct the full cost of eligible depreciating assets, however only for those costing less than $20,000.
This deduction can be applied to assets that are first used or installed for use for a taxable purpose between 1 July 2023 and 30 June 2024.
Additionally, there are also “Lock Out Rules” that we must be aware of that form part of the “Instant Asset Write-Off” rules. The lock-out rules basically state that if you cease to make use of the simplified depreciation rules (that allow instant asset write-off – we have a choice!), then you will be locked out of using them again for a 5 year period.
This rule has been modified over recent years so that small business entities did not need to apply the lock-out rule to income years between 12 May 2015 and on or before 30 June 2023. The latest amendments will allow the operation of the instant write-off for a further 12 months to 30 June 2024.
As a result of this, small businesses can choose to apply these rules and still take advantage of the $20,000 threshold while it applies without being locked out.
However, from 1 July 2024, the maximum claim will then be capped to a meagre $1,000, going back to the old days.