Tax boost helps small business invest smart
By Tristan Lindner, Partner at Downing & Lindner Taxation & Business Services
The instant asset write-off continues to be an important tax incentive for small businesses seeking to manage cash flow while investing in productive assets. The Federal Government has extended the measure, allowing eligible small businesses with aggregated annual turnover under $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 each.
This threshold applies on a per-asset basis, meaning businesses may potentially claim multiple assets under the concession. To qualify, the asset must be first used or installed ready for use for a taxable purpose within the income year. It is also important to note that car depreciation limits continue to apply, which can restrict deductions for certain motor vehicles above the threshold.
In the 2024–25 Federal Budget, the Government announced that the $20,000 threshold will be extended until 30 June 2026, providing additional certainty to businesses planning asset purchases over the coming years.
However, once this extension ends, current legislation anticipates a significant reduction in the threshold & it will revert back to $1,000 under the existing depreciation rules for small business entities (unless further changes are announced before then). This reduction would greatly limit the ability to immediately deduct the cost of most business equipment and may impact the timing of capital expenditure decisions.
Businesses should therefore review their investment plans and consider taking advantage of the current provisions while available.