Instant Asset Write Off Threshold is $20,000 for the 2024 Financial Year

Finally, with only 3 business days left of the 2024 financial year, the Australian Parliament has passed the bill to legislate the increase in the Small Business Instant Asset Write Off from $1,000 to $20,000 for the period 1 July 2023 to 30 June 2024. We are now just awaiting  “Royal Assent” for this measure to become law. Royal Assent these days is pretty quick and is essentially a rubber stamp process. This measure was announced in the May 2023 budget and has taken more than a year to pass through both houses of government. 

So, what does this mean?  

Businesses classed as small businesses and using the “simplified depreciation rules” can use the Instant Asset Write Off (IAWO). For assets purchased and installed ready for use, between 1 July 2023 to 30 June 2024, where the whole cost (including delivery and installation costs) is less than $20,000, the business can bring forward the depreciation to claim immediately, rather than spread across the effective life of the asset. This is purely a timing thing. Except where the tax rates change, the tax savings are exactly the same, just brought forward to improve cashflow in the short term. 

Tips & warnings: 

• The whole cost of the asset, including delivery and installation costs, must be less than $20,000. So, it must be no more than $19,999.99. If the asset (less GST if registered for GST) is $20,000.00 or more, the asset can be pooled or use normal depreciation. 
  

• You must qualify as a “small business” - aggregated turnover of less than $10 million. 
  

• The IAWO is per asset, so multiple assets can access this tax incentive. 
  

• Once the IAWO is used for an asset, the value of that asset will be NIL for taxation purposes, so if the asset is later sold, the full sale price will be included as business taxable income. 
  

• If using a small business pool, and the balance of the pool, before depreciation, is under $20,000 at the end of the 2024 financial year, the whole pool balance can be written off. 
  

• The IAWO extension for the 2025 financial year to $20,000 has not yet been legislated, so at this stage the threshold is $1,000 for the 2025 financial year. 
  

• Remember, you don’t get the cost of the asset back as a tax refund or credit. The business’s taxable income is reduced by the asset cost and you save tax at the applicable tax rate. For example, a trading company, with a tax rate of 25%, will save $250 of tax for every $1,000 it has spent on an eligible asset. So, the asset still costs $750 to the business (plus GST if applicable). 
  

Contact our tax team on 07 3207 1030 for further explanation and how this applies to your business.