As part of the federal government stimulus initiatives surrounding COVID-19, an increase to the Instant Asset Write-Off has been increased from $30,000 up to $150,000 and is now available to benefit many Australian businesses including primary producers.
This increased asset write-off also now extends to businesses with an annual turnover of $500 million or less, offering family farms through to large scale agribusinesses a unique opportunity to improve safety and efficiency of their operation.
While this provides incentive to consider updating stock handling facilities, it is recommended to check individual eligibility. These conditions were initially in place until June 30, 2020 and have been extended to 31st of December 2020.
*As of 9 June 2020, the scheme has been extended, however, take note that: The instant asset write-off eligibility criteria and threshold have changed over time. You need to check your business’s eligibility and apply the correct threshold amount depending on when the asset was purchased, first used or installed ready for use.
If you have been considering updating your stock yards, shearing shed or livestock handling equipment, now, more than ever, is a good time to support Australian manufacturing over imported goods. Proway facilities under $150,000 can be instantly written-off under this scheme – provided the requirements are met i.e. your business turns over less than $500 million in a year.
Key information and guidelines can be found by visiting: Business.gov.au in which ‘immediate’ or ‘instant’ write-off is also referred to as “instant depreciation” and/or “accelerated depreciation”.
Importantly this terminology does not imply there are any cash refunds from the tax office straight away, however does mean that you can reduce your taxable income, and your tax payable, in the financial year that your yards were bought and installed.
Key points:
- There’s no limit to how many assets you can write-off, as long as they cost less than $150,000 each.
- The Instant Asset Write-Off changes apply from 12 March 2020 until 30 June 2020.
Below is a generic example of how the “Instant Asset Write-Off” can be applied to ProWay facilities.
Note: This example is simplified and generalised for ease of clarification. ProWay recommend discussion with a qualified accountant or business advisor to find out how this incentive would apply to your business.
In April 2020, “Client A” trades under a company structure and purchases new sheep yards valued at $65,000 and an adjacent shearing shed fitout for $145,000. The yards and shearing shed works fall under the eligible criteria for instant depreciation.
For this example:
- “Client A” taxable income in 2019-20 is $1,000,000 (below the threshold of $500M).
- As the yards and fitout are separate works and individually cost less than $150,000 the company can immediately deduct the full cost of the facilities from their taxable income (in the 2019-20 financial year).
- The combined works equate to $210,000
Equation: $1,000,000 (Turnover) – $210,000 (deductions) = $790,000 (taxable income)
Therefore, with the instant/accelerated depreciation “Client A’s” taxable income would be $790,000.
Without the deductions: The taxable income is $1,000,000. At the company tax rate of 27.5%, the tax payable would be $275,000.
With the deductions: The taxable income reduces to $790,000. The tax payable would be $217,250
As a result, “Client A” would pay approx. $57,750 less in tax for the 2019/2020 financial year.
Talk to the team at ProWay about how you could take advantage of accelerated write-offs for infrastructure projects in your operation.
For more information visit https://www.business.gov.au/risk-management/emergency-management/coronavirus-information-and-support-for-business/instant-asset-write-off
