What does the Government announcement of the increased instant asset write off mean for the cash flow of your business? Let’s take a look at the summary of the concession and a practical example to explain the cash flow effect.
- From 1 July 2018 to 28 January 2019: Assets under $20,000 can be deducted outright
- From 29 January to 7.30pm 2 April 2019: Assets under $25,000 can be deducted outright
- From 7.30pm 2 April 2019 to 30 June 2019: Assets under $30,000 can be deducted outright
- The threshold does not include GST, so if your asset costs $31,900 including GST, that is $29,000 before GST and can be deducted
- The threshold is for each asset, so you can deduct multiple assets as long as each one is under $30,000
- If you have existing assets in a Small Business General Pool and the closing balance of that pool is under the threshold at the end of the year (before applying depreciation for the year) you can write off the balance of the pool and get a tax deduction in the current year.
- Tax planning opportunity! If you are considering a major asset purchase over the $30,000 threshold and your current Small Business General pool is close to or under the threshold in June 2019, you should contact your accountant to see if you should delay the purchase until after 30 June so you can deduct the old balance of the pool before the new asset purchase puts it over the threshold.
Example 1: Asset purchase
You have decided May 2019 is the time to buy a new motor vehicle in your company and want to know how much will it actually cost you in cash out of your business. Assuming the car costs $31,900 including GST, you pay cash and it is used 100% for business purposes.