Understanding the Instant Asset Tax Write-Off: What It Is and How It Works

The instant asset scheme is relatively straightforward. If your business purchases an eligible asset for less than the current threshold of $150,000, you can immediately deduct the full cost of the asset from your taxable income in the financial year in which it was purchased. 

For example, let’s say your business purchases a new commercial van for $50,000 in the current financial year. If the vehicle is an eligible asset, you can immediately deduct the full $50,000 from your taxable income, reducing your tax burden. 

But it gets even better! The scheme can be used for multiple assets if the cost of each individual asset is less than the current threshold, meaning you can upgrade all your equipment and assets at once and get a significant tax break at the same time!

Of course, there are some limitations to the scheme. Eligibility to use the instant asset write-off depends on: 

• Your aggregated turnover
• The date you purchase the asset 
• When it was first used or installed ready for use 
• The cost of the asset being less than the threshold

You are not eligible to use to asset write-off scheme on an asset if your aggregated turnover is $500 million or more.

To be eligible, the asset must be a new or second-hand asset that is first used or installed and ready for use in the income year the business purchases it, such as: 

• Vehicles used for business purposes 
• Tools and equipment 
• Machinery and equipment 
• Solar panels 

It’s important to note that a car limit applies to the cost of passenger vehicles (excluding motorcycles or similar vehicles) designed to carry a load of less than one tonne and fewer than 9 passengers. For the 2022-23 financial year, the car limit for eligible passenger vehicles is $64,741. 

The instant asset write-off is limited to the business portion of the car limit for the relevant income tax year. For example, if you use your vehicle for 75% business use in the current financial year, the total you can claim under the instant asset write-off is 75% of $64,741, which equals $48,556.

The instant asset tax write-off provides many benefits for small and medium-sized businesses. It can help you: 

• Improve your cash flow by reducing the upfront cost of purchasing assets
• Increase your productivity by investing in new vehicles, equipment or technology 
• Reduce your tax liability and boost your bottom line 
• Create jobs by investing in your business’s growth and expansion 

If you’re a business owner, before June 30 is the perfect time to upgrade your work vehicle and take advantage of the tax benefits before it’s too late.