How to claim the $20k small business tax write-off


Published on

The instant asset write-off has been a boon for small businesses across Australia, but with the tax break set to become much less generous from July 1, 2018 there's limited time left to take advantage of it.

As a reminder, the law allows businesses to obtain an immediate tax deduction for the whole cost of capital items purchased for use in their business provided the cost of the asset is less than $20,000.

That could include computer equipment, office furniture, plant and machinery or even a new car.

small business tax write-off deduction ato $20,000 $20k

Only small businesses can claim the deduction. So to qualify, your business needs to have an aggregate annual turnover of less than $10 million.

Only assets valued at $20,000 or less qualify for the instant deduction.

So if the value of the asset is greater than $20,000, the asset must be depreciated over a number of years.

To claim the full deduction, the asset has to be used in the business. If there is personal use of the asset, such as a computer that you use privately as well as in your business, the deduction needs to be pro-rated to reflect this.

From July 1, the cost threshold for the instant asset write-off will fall from $20,000 to $1000.

So if your business needs to invest in capital assets, make sure the purchases are made by June 30.

Update: the small business tax write-off has been extended for another year

Get stories like this in our newsletters.

Related Stories

Mark Chapman is director of tax communications at H&R Block, Australia's largest firm of tax accountants, and is a regular contributor to Money. Mark is a Chartered Accountant, CPA and Chartered Tax Adviser and holds a Masters of Tax Law from the University of New South Wales. Previously, he was a tax adviser for over 20 years, specialising in individual and small business tax, in both the UK and Australia. As well as operating his own private practice, Mark spent seven years as a Senior Director with the Australian Taxation Office. He is the author of Life and Taxes: A Look at Life Through Tax.