This article is for informational purposes only and does not constitute legal, personal, or tax advice. The information contained herein is subject to change and may vary from time to time. For specific advice applicable to your business, please contact your tax accountant or a qualified professional.
You probably know about the Australian government’s instant asset write-off tax scheme but maybe you need a refresher on how it all works. As always, mid-year is a demanding time for most Australian small business owners. The work truly never stops. EOFY is here again though, and the good news is, there’s still time to take advantage of the ATO’s instant asset tax write-off for small businesses. Read on to find out how.
A refresher on the instant asset write-off scheme
What is it? A way Australian businesses can claim an immediate deduction (write-off) for eligible business purchases, reducing their taxable income. The federal government introduced the scheme in 2015 and it has been extended at every federal budget since – with the latest extension to run until 2023.
What kind of businesses are eligible? Australian businesses with an aggregated turnover of under $5 billion are eligible. This likely means your business can access the instant asset write-off. But bear in mind that you do need to be in business to qualify, and only having a registered ABN is not sufficient evidence of this.
Check the ATO’s guidance and speak with your tax adviser to check whether you meet the eligibility criteria.
What is the threshold? In 2021, as part of the Federal Government’s Coronavirus Stimulus Package, there’s a new threshold for the instant asset write-off. The threshold was previously $30,000 but has since increased to $150,000 per asset claimed.
What are the exceptions? Luckily there aren’t too many, but exceptions currently include buildings, capital works and horticultural plants. As mentioned, you need to make the claim the same financial year that the asset was acquired to reap the full deduction. Make sure you review the ATO information on depreciating asset rules and confirm with your tax adviser.
What type of assets can be claimed?
You can claim the write-off for more items than you might expect. There are no limits to the number of assets you can claim and it’s not limited to heavy machinery, tools or vehicles. For example:
A retail business…
Could use the ATO’s instant asset tax write-off to claim for the POS hardware that runs the Retail POS and payments software. They could also claim for things like a new countertop, mannequins or a new security system, among other assets.
A hair and beauty business…
A hospitality business…
There’s no shortage to the number of things claimable for hospitality business owners. You can include best-in-class hardware kits for your restaurant’s point-of-sale system and kitchen management hardware (like a Kitchen Display System) and systems on the list.
A professional services business…
If your business offers a service or trade and you can’t think of any big-ticket items to claim, you could still consider claiming for any portable or smaller payments hardware you have purchased, such as Square Terminal or Square Reader.
No matter what category your business belongs to, there are a few criteria your claim will need to meet to be eligible. For a full deduction (up to the threshold), the assets must have been acquired after 7:30pm AEDT on 6 October 2020 and installed ready to use by 30 June 2022. If the asset was purchased after the required date, your business might still qualify for a partial deduction under temporary full expensing.
Some final tips for successfully claiming the instant asset write-off
Keep good records
It is essential to maintain good records of your business purchases and key taxation milestones. A bonus for Square customers is that Square integrates seamlessly with Xero, MYOB and Quickbooks so your front of house can easily sync with your back office.
Follow the ATO and your accountant’s advice
Staying compliant is easiest when you have a good understanding of the rules, and strong communication with your professional tax and business advisers.
Keep in mind that you can use a loan to fund the assets you claim
Also keep in mind that if your business is offered a loan from Square Loans, you may still be able to claim a deduction for the cost of eligible items purchased using those funds. Square Loans are new to Australia, and provide business loans that work with your cashflow.
Running a business is never easy, particularly over the last 18 months, so do take advantage of this scheme and any other support you could be eligible for. Check out Square’s hardware solutions, like the sleek new Square Register, for inspiration on business expenses you can claim for, now or in the future.