Show download pdf controls
  • Instant asset write-off for eligible businesses

    Under the instant asset write-off, eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used, or installed ready for use.

    Instant asset write-off can be used for:

    • multiple assets as long as the cost of each individual asset is less than the relevant threshold
    • new and second-hand assets.

    It cannot be used for assets that are excluded from the simplified depreciation rules.

    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. This depends on when the asset was purchased, first used or installed ready for use.

    Recent changes

    From 12 March 2020 until 31 December 2020 the instant asset write-off:

    • threshold amount for each asset is $150,000 (up from $30,000)
    • eligibility has been expanded to cover businesses with an aggregated turnover of less than $500 million (up from $50 million).

    On this page:

    See also:

    Eligibility

    Eligibility to use instant asset write-off on an asset depends on:

    • your aggregated turnover (the total ordinary income of your business and that of any associated businesses)
    • the date you purchased the asset
    • when it was first used or installed ready for use
    • the cost of the asset being less than the threshold.

    If you run a small business and choose to use the simplified depreciation rules, you must use instant asset write-off on all eligible assets.

    Businesses with an aggregated turnover of $500 million or more are not eligible to use instant asset write-off.

    From 1 January 2021 the instant asset write-off will only be available for small businesses with an aggregated turnover of less than $10 million and the threshold will be $1,000.

    Thresholds

    The thresholds have changed over the last few years and are as follows:

    Instant asset write-off thresholds

    Eligible businesses

    Date range for when asset first used or installed ready for use

    Threshold

    Less than $500 million aggregated turnover

    12 March 2020 to 31 December 2020 (see note)

    $150,000

    Less than $50 million aggregated turnover

    7.30pm (AEDT) on 2 April 2019 to 11 March 2020

    $30,000

    Less than $10 million aggregated turnover

    29 January 2019 to 7.30pm (AEDT) on 2 April 2019

    $25,000

    Less than $10 million aggregated turnover

    1 July 2016 to 28 January 2019

    $20,000

    Less than $2 million aggregated turnover

    7.30pm (AEST) on 12 May 2015 to 30 June 2016

    $20,000

    Less than $2 million aggregated turnover

    1 January 2014 to prior to 7.30pm (AEST) 12 May 2015

    $1,000

    Less than $2 million aggregated turnover

    1 July 2012 to 31 December 2013

    $6,500

    Less than $2 million aggregated turnover

    1 July 2011 to 30 June 2012

    $1,000

    Make sure you have checked the eligibility criteria for your business.

    Note: For eligible businesses with an aggregated turnover from $10 million to less than $500 million, the $150,000 threshold applies for assets purchased from 7.30pm (AEDT) on 2 April 2019 but not first used or installed ready for use until 12 March 2020 to 31 December 2020.

    Exclusions and limits

    There are a small number of assets that are excluded.

    Find out about:

    Car limit

    A car limit applies to the cost of passenger vehicles (except a motorcycle or similar vehicle) designed to carry a load less than one tonne and fewer than nine passengers. The one tonne capacity relates to the maximum load your vehicle can carry, also known as the payload capacity.

    The payload capacity is the gross vehicle mass (GVM) as specified on the compliance plate by the manufacturer, reduced by the basic kerb weight of the vehicle.

    The basic kerb weight is the weight of the vehicle with a full tank of fuel, oil and coolant together with spare wheel, tools (including jack) and factory-installed options. It does not include the weight of passengers, goods or accessories.

    • Payload capacity = GVM – basic kerb weight

    The car limit is:

    • $57,581 for the 2019–20 income tax year
    • $59,136 for the 2020–21 income year.

    The instant asset write-off is limited to the business portion of the car limit for the relevant income tax year. For example, the car limit is $57,581 for the 2019–20 income tax year. If you use your vehicle for 75% business use, the total you can claim under the instant asset write-off is 75% of $57,581, which equals $43,186.

    You cannot claim the excess cost over the car limit under any other depreciation rules. For a worked example, refer to example 1 below.

    If your vehicle is not considered a passenger vehicle, the car limit does not apply. You can claim the cost of the vehicle if it is less than the relevant threshold amount. Refer to example 6 below.

    See also:

    Cost of asset exceeds threshold

    If you are a small business using the simplified depreciation rules, and the cost of the asset is the same as or more than the relevant instant asset write-off threshold, the asset must be placed into the small business pool. You may be able to use the backing business investment – accelerated depreciation for certain eligible assets.

    If you are not using the simplified depreciation rules, you may be able to use the general depreciation rules or use the backing business investment – accelerated depreciation for certain eligible assets.

    See also:

    Work out your deduction

    The entire cost of the asset must be less than the relevant threshold, not including any trade-in amount. Whether the threshold is GST exclusive or inclusive depends on if you're registered for GST.

    To work out the amount you can claim, you must subtract any private use portion. The balance (that is the portion you use to earn assessable income) is generally the taxable purpose portion (business purpose portion). While you can only claim the taxable purpose portion as a deduction, the entire cost of the asset must be less than the relevant threshold.

    This also applies to research & development (R&D) use. When you work out the amount you can include in the calculation of your R&D tax offset for your R&D use, you must subtract any non-R&D use including the taxable purpose portion and private use portion.

    Later sale or disposal of asset

    If you use the instant asset write-off for an asset and then sell or dispose of that asset, you need to include the taxable purpose portion of the amount you received for the asset in your assessable income for that year.

    If you use the instant asset write-off for an asset that is later destroyed (for example, in a bushfire or flood) then the amount you receive (such as from an insurance payout) for the destruction of the asset is included in your assessable income.

    See also:

    Example 1: Purchase of a motor vehicle for business purposes – the effect of the car limit for depreciation

    Edward and Edna own and run a small irrigation supplies business. On 27 March 2020 the business purchases a luxury car that is designed to carry passengers for $80,000. The instant asset write-off threshold at the time they first use the car in the business is $150,000.

    The cost of the car for depreciation is limited to the car limit at that time ($57,581 for the 2019–20 income tax year).

    As the cost of the car is above the $57,581 car cost limit for depreciation, the business can only claim an instant asset write-off of $57,581 for the year ending 30 June 2020. The business can't claim the excess cost of the car under any other depreciation rules.

    They also decide to update their work ute and the business purchases a ute for $65,000 on 27 April 2020. The ute isn't designed to carry passengers (and has been set up with all the trade tools in the tray) so the car cost limit for depreciation doesn't apply. The business can claim a full deduction of $65,000 as an instant asset write-off.

    End of example

     

    Example 2: Purchasing multiple assets

    PlumbCo is a company that operates a plumbing business with an aggregated turnover less than $10 million. On 10 April 2019, PlumbCo purchases a new van for $22,000 and starts to use it for the business. The following month PlumbCo purchases a trailer for $14,000 and starts to use it to support the business.

    PlumbCo has spent a total of $36,000. As the $30,000 instant asset write-off threshold applies to each asset, PlumbCo is able to claim a deduction for both the van and the trailer in its 2019 tax return.

    Image of Question 6 - Calculation of total profit or loss expenses on the company tax return.

    Label 6X Depreciation expenses field on the company tax return.

    Label 10A Small business entity simplified depreciation field on company tax return.

    PlumbCo includes the combined amount of $36,000 at label 6X of the Company tax return. Because PlumbCo is a small business entity, the amount is also included at label 10A.

    End of example

     

    Example 3: Exceeding the threshold

    Daryl owns a small electrical business, Daryl’s Electrical, which has an aggregated turnover less than $10 million. On 28 July 2017, Daryl purchases a ute for $40,000. He estimates he will use the ute 40% of the time for his business.

    Even though the cost of the ute to the business is $16,000 ($40,000 × 40%), Daryl can't use the instant asset write-off as the total cost of the ute of $40,000 exceeded the relevant threshold of $20,000.

    Instead he adds the $16,000 business portion of the ute's cost to Daryl’s Electrical small business pool.

    End of example

     

    Example 4: Business and personal use of asset

    On 18 May 2018, Fiona buys a new computer for $6,800 that she uses 80% of the time for her business as a sole trader. She also bought a new printer for $700 that she uses for 100% of the time for business purposes.

    For the computer, Fiona calculates the business use portion that she can claim a deduction for under the instant asset write-off as $5,440 (80% of $6,800). For the printer, she can claim the entire cost of $700.

    Label P8 Business income and expenses on the Business and professional items schedule.

    Label P10 Small business entity simplified depreciation on the Business and professional items schedule.

    Fiona includes the combined amount of $6,140 at label M(P8) and P10 of the Business and professional items schedule, which is filled out when completing her tax return.

    End of example

     

    Example 5: Asset purchased but not ready for use

    Leslie is a florist and her business requires a new van to help expand her deliveries. Leslie purchases a van for $22,500, which she pays for on 23 January 2019. Under the terms of the contract, delivery of the van is made on 30 January 2019. The van is not ready for use until after 29 January 2019. At that time, the instant asset write-off threshold s $25,000. Leslie is able to claim the entire cost of the van in her 2019 tax return.

    If the van had been delivered before 29 January 2019 and Leslie started to use it at the time of delivery, she would not have been able to write-off the entire cost of the van. This is because the cost of the van cost exceeded the threshold applicable at that time of $20,000.

    End of example

     

    Example 6: Purchase of a motor vehicle with a carrying capacity of more than one tonne but less than nine passengers – the effect of the car limit for depreciation

    Muhammad purchases a new vehicle for $70,000 to transport goods for his business. The vehicle is used 100% for business purposes. He receives the vehicle ready for use on 3 June 2020.

    The payload capacity of the vehicle is 1065 kg. The vehicle carries less than nine passengers. The car limit does not apply as the vehicle has a payload capacity of more than one tonne.

    Muhammad can claim the full cost ($70,000) of the vehicle under the instant asset write-off because:

    • the vehicle is less than the $150,000 threshold
    • he has the vehicle ready for use before 30 June 2020
    • the car limit does not apply (as the vehicle has a payload capacity of more than one tonne)
    • the vehicle is only used for business purposes.
    End of example

    See also:

    Last modified: 19 Aug 2020QC 61417