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What is an Instant Asset Write Off?

by OnDeck Australia,   Mar 02, 2023

A lot of business owners have been asking us about instant asset write-off and its recent boost with the temporary full expensing scheme – what it is and how it can benefit them. So, in this blog post, we’ll give you a rundown of what the scheme is all about, and how you can take advantage of it to boost your business.

There are currently two schemes available:

The instant asset write-off scheme is the older scheme and applies to assets used before June 2021.

The temporary full expensing scheme is the newer, improved replacement to the asset write-off scheme for purchases after June 2021.

Both the instant asset write-off scheme and the temporary full expensing scheme are temporary tax depreciation incentives made to help businesses recover from recent instabilities by supporting business investments in equipment and other assets. They allow businesses to immediately deduct the entire cost of depreciating assets from their taxes, saving you money and improving the bottom line.

Temporary full expensing is an incredibly useful tool for business owners who are looking to reduce their taxable income and purchase additional assets. This scheme allows Australian businesses to deduct the amount spent on eligible assets from their taxes when filing a tax return. It applies to new or second-hand assets and can be claimed until June 30th of 2023.

Assets that aren’t eligible for temporary full expensing can be claimed by eligible businesses under the previous instant asset write-off scheme if it was purchased by 31st December 2020, and first used or installed before 30th June 2021, though this comes with a sliding claim threshold depending on the age of the purchase.

If you’re an owner looking to reduce long-term expenses, keep reading to find the eligibility requirements and see if the temporary full expensing or instant asset write-off schemes could be just the thing for your business.


How can small businesses benefit from the instant asset write-off scheme?

For small businesses looking to capitalise on their purchasing and refresh their inventory, the instant asset write-off scheme may be just the ticket. By taking advantage of the temporary full expensing scheme, small businesses can write off any assets with no threshold. If using the instant asset write-off scheme, assets valued at up to AUD$150,000 that are used solely for business purposes can be claimed.

This allows companies to quickly improve their operations with better workplace infrastructure and technology without putting more strain on their bottom line. The schemes also apply to second-hand assets, which opens up even more potential opportunities for small businesses looking to get ahead. It is an ideal way for a small business to grow, upgrade and remain competitive as well as make purchases that they might otherwise not have been able to afford expenses-wise. Utilising this smart money management tool can help your company step up its game and level up your success in no time!

Combining instant asset write-offs with borrowing

You are still eligible to take advantage of instant asset write-offs or temporary full expensing deductions if you use a loan to purchase assets for your business. This makes it an appealing deal for businesses without the cash flow to afford the upfront cost of making significant purchases such as for expensive new equipment.

As always, we recommend seeking professional financial advice to develop and plan and check eligibility before making financial decisions.

Combining a loan with instant asset write-off deductions gives you the flexibility to maintain cash flow by repaying the total cost of the loan over a period of time, instead of having to fork out for asset purchases all at once, with the bonus of recouping the asset cost via this government scheme. It’s a great in-road to acquiring the equipment needed to outgrow competitors without compromising business turnover.

What are the eligibility criteria?

Eligible Businesses for temporary full expensing

To be eligible for temporary full expensing for the full cost of an asset you must either:
  • Be a business with an aggregated turnover of less than $5 billion.
  • Be a corporate tax entity that meets the alternative income test
When filing a tax return for 2020-21, 2021-22, or 2022-23, an eligible entity can claim a deduction for the costs of:
  • New assets first held, first used or installed ready for a taxable purpose between 6th October 2020 and 30 June 2023
  • Eligible second-hand assets held, used or installed within the same timeframe if your business’s aggregated turnover is less than $50 million.


Eligible Businesses for instant asset write-off

For a business to be eligible for instant asset write-off for assets 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.

Instant asset write-offs can be used for deductions on multiple assets, so long as the cost of each of them is below the deduction threshold.

You can find a table of additional eligibility criteria for assets purchased earlier than this with differing thresholds and annual turnover requirements on the Australian Tax Offices page.


How to claim an immediate deduction

Both instant asset write-offs and temporary full expensing claims are made as part of your business’s tax return forms. While we recommend you seek your own tax and financial advice and check eligibility with the ATO, here are some of the fundamental steps. Claiming the write-off can be an easy and rewarding process, allowing you to save money on your business’s taxes.

  • Gather all of the necessary documents to prove that you are eligible for the write-off.
  • Once you have everything together, make sure all information is correct, accurate and up to date before submitting it.
  • Additionally, keep copies of any forms or records in case they are needed further down the line.
  • After finally submitting your forms and records, then comes the exciting part, awaiting your tax refund!

By following these simple steps (gather documents, double-check accuracy and submit paperwork) claiming a write-off can be hassle-free.

The instant asset write-off scheme is an easy way for small businesses to get an immediate tax deduction on assets that they purchase. By combining the instant asset write-off with borrowing, businesses can maximize their deductions and save money on their taxes while acquiring the equipment needed to keep the business running at maximum efficiency. To be eligible for the scheme, businesses must meet certain turnover requirements. Claiming the write-off is easy – simply include it in your tax return at the end of the financial year.

Unsecured business loans can be up to $250,000 with no asset security required. These loans can be funded in as fast as 2 hours from approval.

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