Publication date: 09 Jun 20 |
Source: THE TAX INSTITUTE
SYDNEY, 9 June 2020:
The Tax Institute welcomes the Government’s announcement today, that the Government will extend the $150,000 instant asset write-off (IAWO) by six months until 31 December 2020. Under the measure, the asset must be both acquired and installed ready for use by 31 December 2020, instead of 30 June 2020.
The Tax Institute’s Senior Advocate, Robyn Jacobson, said “The Tax Institute welcomes the extension of the IAWO. This will assist thousands of businesses and provide additional time for them to acquire and install assets.”
The measure addresses The Tax Institute’s joint submission with the professional bodies on 3 April 2020 in which the Institute sought an extension to 31 December 2020 for businesses to acquire and start to use or install an asset for use, given the significant deterioration in the economic outlook for businesses since the announcement on 12 March 2020, and the difficulties many businesses face with supply chains.
“This measure will be the fifth amendment to extend the IAWO since 2015. We would support further changes to the IAWO to make it a permanent feature of the tax system beyond 31 December 2020, by allowing businesses with an aggregated turnover of less than $50 million to access an ongoing immediate write-off for assets costing less than $30,000 being the pre-COVID-19 cap,” said Ms Jacobson.
“This would bring efficiencies to the tax system by relieving businesses of the need to depreciate an asset’s cost over its effective life and provide a deduction that mirrors the outlay of cash flow, as well as remove the need for annual amendments to the tax law to reflect what is clearly government support for an instant asset-write off.”
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The IAWO currently allows businesses that have an aggregated turnover of less than $500 million (grouping rules apply) to claim a deduction for a depreciable asset that costs less than $150,000 (after claiming any GST credits). The $150,000 cap applies on a per asset basis and is available for new and second-hand assets. However, the car limit of $57,581 (for 2019–20) and $59,136 (for 2020–21) still applies.
The $150,000 IAWO was originally announced on 12 March 2020 as part of the Government’s economic stimulus package and was due to end on 30 June 2020. From 1 July 2020, the current $150,000 cap was to revert to $1,000 for businesses with an aggregated turnover of less than $10 million, and the IAWO was due to end entirely for larger businesses.
The extension of the IAWO to 31 December 2020 is subject to the passage of amending legislation through Parliament.