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Understanding the ATO Instant Asset Write-Off

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The ATO’s instant asset write-off is another form of financial relief the ATO and the Federal Government has included and expanded on in the COVID-19 relief schemes. First developed in 2015 as a way of enabling small businesses to claim the depreciation amount of a work-related purchase like a car or a computer in one hit, rather than gradually over a number of years. Recently, the ATO expanded on the criteria needed for this asset write-off. If you are a business owner or sole trader interested in the instant asset write-off, read on to find out how the scheme works. 

 

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What is the ATO Instant Asset Write-Off?

The instant asset write-off scheme was initially introduced in 2015 and was largely aimed at helping small businesses claim the depreciation amount of company assets immediately, rather than over many years. The onset of the COVID-19 pandemic has seen the government and the ATO introduce a number of financial relief schemes aimed at helping businesses survive this troubling time, and recently, they adjusted the criteria for the instant asset write-off scheme to include larger businesses. 

As part of the ATO and the government’s economic stimulus measures, the asset limit for the instant asset write-off scheme has increased from $30,000 to $150,000. The pool of eligible businesses has also been amended from those with an aggregated turnover of less than $50 million, to an aggregated turnover of less than $500 million. These significant changes will see the instant asset write-off scheme benefit many more businesses than before. 

This means that a greater number of businesses can purchase a piece of equipment or a company vehicle and receive an immediate deduction of up to $150,000. However, the relief scheme is not without strict regulations that must be adhered to if businesses are to utilise this financial relief benefit to its maximum, and there is some confusion in particular around how the scheme works for company-owned and bought vehicles. 

 

What is the ATO Instant Asset Write-Off Limit on Cars?

While the instant asset write-off limit has increased from $30,000 to $150,000, a ‘car cost limit’ has been implemented for businesses wanting to purchase a vehicle at this time. This will define the amount you can actually claim on a newly purchased vehicle. 

Specifically, cars that are “designed to carry a load less than one tonne and fewer than nine passengers,” have a total claim limit of $57,581 and anything beyond that point “cannot be claimed under any other depreciation rules,” the ATO explains. 

However, the full purchase price of a vehicle which can carry more than one tonne/more than nine passengers can be claimed back. 

Cars that cost $150,000 or more, as well as farm trucks and tractors, are ineligible for the instant asset write-off scheme.

 

Does the Car Threshold Include LCT, On-Road Costs, Insurance and Registration?

All costs but insurance and registration are included in the car threshold amount – this includes stamp duty, any accessories, luxury car tax, on-road costs and delivery. 

Insurance and registration are recurring business costs, which are immediately deductible under the general deduction provision and thus not included in the cost of the car. 

 

Are Lease and Financed Cars Eligible?

A hire purchase lease will be eligible for the instant asset write-off scheme, but operating and finance leases will not qualify. 

 

Criteria for the ATO Instant Asset Write-Off: Cars

  1. Must be a business asset. Any old asset will not comply. Whether it’s a new or second hand asset, to get the 100% deduction the asset must be 100% employed in your business. Assets that are part business and part private will require a log book to establish a business use percentage.
  2. Car limits may still apply. A passenger vehicle designed to carry a load of less than 1 tonne and fewer than 9 passengers is limited to a maximum write-off of $57,581 – even if it 100% used in business. Vehicles that are greater than one tonne or carry 9 passengers or more may be eligible for a higher write-off amount.
  3. You must own and be using the asset by 30 June. The asset must be owned by the business and be in use (or able to be used) by the business by 30 June to claim the write-off.
  4. Employees are not eligible for the instant asset write-off scheme, but they may be able to claim back some of their own car usage.

Many car dealerships are calling for the extension of the scheme to allow more businesses to take advantage of it. 

 

Choose Affinitas Accounting

The ATO’s instant asset write-off can provide a major financial aid to many businesses. If you think you are eligible and want to apply, please feel free to contact one of our friendly business accountants for swift, prompt assistance. 

 

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