The Federal Government has announced it will extend the $150,000 instant asset write off (IAWO) by six months to 31 December 2020.
While good news for business owners, determining your eligibility for the IAWO is complex and depends on your aggregated turnover. This requires:
The graphic below shows the change in asset thresholds for entities with aggregated turnovers ranging from less than $10 million to less than $500 million, and how the threshold has changed over time. Eligibility to the IAWO depends on whether you are a small business entity (SBE) or medium sized businesses (MSB), which we will explore in more detail. Importantly, from 3 April 2019 an SBE or an MSB can be entitled to an IAWO.
An SBE is broadly an entity that has an aggregated turnover of less than $10,000,000. The current law allows an SBE to use the IAWO where:
The threshold for SBEs was increased from $30,000 to $150,000 for the period 12 March 2020 to 30 June 2020 and was due to revert to $1,000 from 1 July 2020. However, with the Government’s announcement, the $150,000 threshold will now continue to 31 December 2020.
It should be noted the rules defining an SBE are not simple, in particular, aggregated turnover includes the annual turnover of the entity, its affiliates and connected entities. An SBE elects into the simplified small business depreciation regime which provides for both the IAWO and for depreciation under a pooling system.