ATO: Increased thresholds to support your business

Jack Malarkey

Well-Known Member
From the Australian Taxation Office’s Small Business Newsroom:

(https://www.ato.gov.au/Newsroom/smallbusiness/General/Increased-thresholds-to-support-your-business/)
  • Increased thresholds to support your business


    31 March 2020
    The government's new measures to help businesses withstand and recover from the economic affect of COVID-19 recently became law.
    From 12 March 2020 businesses with an aggregated turnover of less than $500 million can access these two measures.
    1. Enhancing the instant asset write-off:
    • The threshold amount for each asset is $150,000 (up from $30,000).
    • This applies to assets first used or installed ready for use from 12 March 2020 until 30 June 2020.
    • Businesses can claim an immediate deduction (business portion only) for multiple assets, new or second hand, provided each asset costs less than $150,000.
    • Other thresholds and turnovers apply before this date.
    1. Backing business investment:
    • Also known as accelerated depreciation, this measure lets you claim deductions on certain new depreciating assets at an accelerated rate.
    • The asset must be a new depreciating asset that you acquired and first used or installed ready for business use from 12 March 2020 until 30 June 2021.
    • Your business must not have already applied other depreciation deductions or the instant asset write-off to the asset.
  • Remember, registered tax agents can help you with your tax.
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Jack Malarkey

Well-Known Member
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  • #3
That’s a great question, @Boofhead. I have been wondering the same thing myself.

The instant asset write-off is currently due to end on 30 June 2020. Any extension would require enactment by Parliament of amending legislation.

The Government has a track record each year of extending the instant asset write-off for another income year. Yet it typically delays the announcement of the proposed extension until the Budget on the second Tuesday in May.

This is a deliberate strategy to encourage the bring-forward of investment to the current income year.

This year, the Budget has been deferred from Tuesday 12 May 2020 until Tuesday 6 October 2020:
https://uberpeople.net/threads/federal-budget-postponed-until-tuesday-6-october-2020.387377/ .

Parliament is currently due to sit next from Tuesday 11 August 2020:

.

There are, however, some suggestions that it MAY sit briefly in May 2020.

My expectation is that there will be an extension of the instant asset write-off until 30 June 2021.

The date of announcement of this extension would be in early May if there will be May sittings or in late June if enactment had to wait until August.

It’s entirely feasible that there would be some cutting back from the current $150,000 threshold to, say, $50,000. The turnover threshold may also be dropped to something lower than the current $500 million.

It’s true that the backing business investment incentive is due to continue until 30 June 2021.

That incentive does, however, contemplate write-off over a longer period than the instant asset write-off.

Most importantly, the backing business investment incentive requires that the asset purchased be new whereas the instant asset write-off extends to second-hand assets.

This is especially significant for rideshare drivers, who typically purchase second-hand cars.

I’ll be most interested to see how all of this pans out. My ‘predictions’ or ‘expectations’ are really only speculation or guesses.
 
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Jack Malarkey

Well-Known Member
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  • #4
Post automatically merged:

What evidence do I have to support my statement that the Government deliberately delays announcement of extensions to the instant asset write-off and then typically extends it only for one income year at a time so as to encourage the bringing forward of investment in assets?

The advisory Board of Taxation had the following to say at paragraph 8.15 on page 95 of its report of its Review of Small Business Tax Concessions:

‘In relation to stakeholder feedback to make the concession permanent, the Board is of the understanding that part of the aim in having a restricted timeframe for the higher threshold is for the concession to act as a stimulatory measure to encourage the bringing forward of capital investments. Ultimately, this is a matter for Government. However, the Board believes that the government should consider making the concession permanent’.

(
)
 
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WestSydGuy

Well-Known Member
Awesome info @Jack Malarkey thank you.

I was wondering with the CoViD-19 reduction in trade (for me, to zero), and car loan/insurance/rego/CTP still ticking along, I wanted to ask two questions to the community, and yourself:

  1. Would the 3 month/5 year logbook still be a valid way to account for costs against the vehicle during this time, and perhaps for the next 6 month period. This may be valid for many drivers currently.
  2. As trade has been reduced for everyone, my 2018-19 financial year was over the non-commercial losses/4 tests income of 20k ex GST, if this 2019-20 year is below $20k revenue, could I make a non-commercial loss of my next vehicle, using the instant asset reduction, against my primary income in the next FY? Or it applies for the current year only? Essentially, how does "Part year trading" apply with the expected CoViD-19 timeline from an ATO perspective? Ref: https://www.ato.gov.au/business/non-commercial-losses/four-tests/

These are all with the current CoViD-19 issues in place. I'm sure it's a simple answer, but I'm struggling to answer it myself.
 

Jack Malarkey

Well-Known Member
  • Thread Starter Thread Starter
  • #7
Thanks, @WestSydGuy, for your questions.

1. Would the 3 month/5 year logbook still be a valid way to account for costs against the vehicle during this time, and perhaps for the next 6 month period? This may be valid for many drivers currently.

Once you have established the extent of business use of the car during the 12-week log book period, you still need to make a reasonable estimate of the business kilometres travelled during the income year.

The estimate must take into account all relevant matters including seasonal factors, holidays and any significant variations in the pattern of use of the car.

(Normally, this adjustment based on a reasonable estimate doesn’t loom large in the scheme of things but it does loom large in unusual circumstances such as the present.)

2. As trade has been reduced for everyone, my 2018-19 financial year was over the non-commercial losses/4 tests income of 20k ex GST, if this 2019-20 year is below $20k revenue, could I make a non-commercial loss of my next vehicle, using the instant asset reduction, against my primary income in the next FY? Or it applies for the current year only?

Essentially, how does "Part year trading" apply with the expected CoViD-19 timeline from an ATO perspective?
Ref: https://www.ato.gov.au/business/non-commercial-losses/four-tests/

The part-year trading apportionment wouldn’t be available for a business carried on for the full income year including if the continuing business was in hibernation.

The instant asset write-off is available only in the year in which you incurred the relevant expense. You can’t defer claiming it to a later income year.
 
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WestSydGuy

Well-Known Member
Excellent info Jack, hopefully will help others also.

If anyone is considering buying a computer (over $300 ex GST) in the last month of this financial year, can we apply the instant write off to computers, or it needs to be put into a 4 year depreciation plan?
 

Jack Malarkey

Well-Known Member
  • Thread Starter Thread Starter
  • #9
Excellent info Jack, hopefully will help others also.

If anyone is considering buying a computer (over $300 ex GST) in the last month of this financial year, can we apply the instant write off to computers, or it needs to be put into a 4 year depreciation plan?
The instant asset write-off is available for the full range of depreciating assets including computers.

The $300 threshold for immediate write-off is relevant only to employees and to those businesses too large to benefit from the instant asset write-off.
 
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