What is Instant Assets Write-Off/Temporary full expensing?
It’s best to read our full guide on what instant asset write-off is, but the basic overview is that it’s an immediate tax deduction for businesses with an annual turnover of under $500 million. The Australian government introduced instant asset write-off to stimulate economic activity and help businesses buy needed eligible assets for business purposes, like office equipment or vehicles, or refurbish existing assets. Luckily, sole traders count as eligible businesses to take advantage of this incentive to upgrade their business.
Can a sole trader benefit from the instant asset write-off scheme?
The short answer is yes. As a sole trader, you may be eligible to take advantage of the instant asset write-off scheme and benefit from significant tax savings. This incentive allows small businesses to immediately deduct the entire cost of depreciating assets from their taxes, saving money and improving the bottom line.
Sole trader eligibility for instant asset write-off
The same eligibility rules apply to sole traders as for other businesses, and the immediate deduction amount that can be claimed is dependent on the aggregated annual turnover and assessable income of a business.
For a sole trader to be eligible for instant asset write-off and claim assets of up to $150,000:
- Your aggregated annual turnover must be less than $10 million.
- The asset must have been purchased between 12 May 2015 and 31st December 2020.
- The asset must have been first used or installed between 12th March 2020 and 30th June 2021.
Sole traders can use this to get an immediate deduction on multiple business assets in their tax return so long as each of them cost less than the deduction threshold.
Read through the full eligibility criteria according to the ATO.
If you’re eligible, we recommend seeking professional tax advice before making financial decisions for your business.
How a sole trader can leverage this incentive
As a sole trader, you may have put off buying needed assets due to the costs involved. Instant asset write-offs provide an excellent opportunity for sole traders to get their business up and running quickly by purchasing necessary equipment without having to wait until they can afford the full cost.
This incentive also makes it easier for sole traders to upgrade existing assets, whether it be technology or vehicles. This can help sole traders keep up with the competition and make their business more competitive.
If you’re a sole trader who has:
- An aggregated turnover of at least $100,000.
- Been in business for at least 1 year.
- A minimum credit score of 500.
Then you could take out a small business loan to fund the initial costs of new or eligible second hand assets, then claim them on tax under the instant asset write-off incentive.
The instant asset write-off scheme is a great incentive for sole traders to upgrade their businesses and save on taxes. If you’re a sole trader, we recommend taking the time to read through some examples of instant assets write-off and checking the eligibility criteria provided by the ATO.
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