The 2024–25 Federal Budget introduces several new tax measures designed to support and stimulate small businesses.
Instant Asset Write-Off Extended
The Government has confirmed the extension of the $20,000 instant asset write-off for small businesses with an aggregated turnover of less than $10 million. To be eligible, businesses must be actively trading, meet the turnover threshold, and opt into the simplified depreciation rules to access the concession.
- The threshold applies on a per-asset basis, meaning multiple assets can be immediately deducted, provided each asset costs less than $20,000.
- The asset must be first used or installed ready for use between 1 July 2024 and 30 June 2025.
- Assets over $20,000 can still be depreciated through the simplified small business pool.
For comparison, below is an example to indicate how an asset is usually depreciated. Let’s say, a $15k asset is purchased on 1st July 2024 under a small business and assuming it is depreciated using diminishing value method on a 20% depreciation rate.
Cost of the Asset $15,000
Purchase Date 1/07/2024
Opening WDV* Depreciation Closing WDV*
Year 1 – FY 2025 $15,000 $3,000 $12,000
Year 2 $12,000 $2,400 $ 9,500
Year 3 $ 9,600 $1,920 $ 7,680
Year 4 $ 7,680 $1,536 $ 5,144
Year 5 $ 6,144 $1,229 $ 4,915 **
…
*WDV – Written Down Value
Under this approach, the business is going to claim the annual depreciation over the asset’s useful life. Only the depreciation over the first five years is shown in the above table for illustration purpose, after year 5, WDV of $4,915 ** will continue to be claimed gradually in future years, or when the asset is sold or scrapped. However, by having this instant asset write-off policy, the business can immediately claim the asset cost in full, as long as it meets the above eligibility criteria, in the year the asset is first used or installed ready for use.
The extension of the instant asset write-off policy is merely to provide the business with an option to bring forward the timing of the deduction that clients are otherwise entitled to rather than giving an additional deduction.
