Instant Asset Write-off

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As part of the Federal Government’s first phase of the stimulus package for the economy, businesses with an “aggregated turnover” of less than $500 million can now claim an immediate deduction for depreciating assets costing less than $150,000 that are first used or installed ready for use from 12 March 2020.

Whilst this concession was due to end on 30 June 2020, the Government has announced recently that it will extend the concession for another 6 months until 31 December 2020. This means eligible businesses can still claim immediate deductions for part of the 2020-21 financial year.

Depending on the aggregated turnover of the business and the date when the asset is first used or installed ready for use, the following thresholds apply from 1 July 2019 onwards:

Aggregated Turnover Date Range Threshold
< $500 million 12 March 2020 to 31 December 2020 $150,000
< $50 million 7.30pm (AEDT) on 2 April 2019 to 11 March 2020 $30,000
< $10 million 29 January 2019 to 7.30pm (AEDT) on 2 April 2019 $25,000

The aggregated turnover is calculated based on the total ordinary business income of the business and its associated entities derived from the ordinary course of carrying on its business. For the 2019-20 financial year, businesses can choose to use either its aggregated turnover in the 2018-19 or 2019-20 financial year.

The immediate deduction is available for both new and second-hand assets. However, certain assets are specifically excluded, such as:

  • buildings and leasehold improvements that fall under the capital works deduction regime;
  • software allocated to a software development pool (but not other software);
  • horticultural plants and other certain assets used in the primary production; and
  • assets that are leased out, or expected to be leased out, for more than 50% of the time on a depreciating asset lease.

Moreover, eligible businesses acquiring cars as depreciating assets can only claim up to the car limit of $57,581 for the 2019-20 financial year. Cars in this context mean passenger vehicles (except motor cycles or similar vehicles) designed to carry a load less than one tonne and fewer than 9 passengers. However, eligible business can still claim immediate deductions for other vehicles (e.g. panel vans, utilities, trucks and machinery) that are designed to carry a load of more than 1 tonne and/or more than 8 passengers where the cost of the vehicles are less than $150,000.

Accelerated Depreciation for Depreciating Assets

In addition to the instant asset write-off, businesses with an aggregated turnover of less than $500 million can also claim a depreciation deduction at an accelerated rate of 50% for eligible depreciating assets. While there is no cap on the cost of the depreciating asset purchased, the asset must be new and it has not previously been held by another entity (other than as trading stock). Importantly, the asset must not be one where the business has applied the instant asset write-off or other depreciation deductions (e.g. businesses cannot double-claim the deductions from the same single asset under different provisions).

For small businesses with an aggregated turnover less than $10 million that use the Simplified Depreciation Rules, the accelerated rate is 57.5% in the first income year and 30% thereafter.

The accelerated rate is available for eligible depreciating assets that are first held, and first use or installed ready for use for a taxable purpose from 12 March 2020 to 30 June 2021.

ATO Tax Payment Concessions

The ATO has also announced various concessions to assist taxpayers experiencing financial difficulty as a result COVID-19, which include:

  • the option to vary PAYG Instalments to zero or claim a credit for instalments paid under the previous activity statements without attracting penalties or interest;
  • the ability to defer up to 6 months the payment date of amounts due through the business activity statement (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise;
  • allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting to get quicker access to GST refunds they may be entitled to;
  • remitting any interest and penalties, incurred on or after 23 January 2020, that has been applied to tax liabilities; and
  • allowing affected businesses to enter into low-interest payment plans for their existing and ongoing tax liabilities.

Payroll Tax Grants and Concessions for WA Businesses

The WA State Government has also announced a raft of payroll tax measures to assist businesses impacted by COVID-19.

First, a one-off grant of $17,500 will be available for employers, or groups of employers, whose annual Australian taxable wages are more than $1 million and up to $4 million. For a group of employers, a single grant will be payable to the designated group employer. Eligible employers do not need to apply for the grant as they will automatically be paid by cheque or EFT from July 2020.

Second, the payroll tax threshold will be increased to $1 million from 1 July 2020. This effectively brings forward the original planned date of 1 January 2021 for the threshold increase. This measure will save eligible employers an estimated $1,375 to $1,625 in payroll tax. Further, it is estimated that approximately 300 businesses will no longer be liable for payroll tax due to the threshold increase and, therefore, may benefit from the additional saving on compliance costs.

The third and final measure enables employers, or groups of employers, who pay $7.5 million or less in Australian taxable wages and have been directly or indirectly impacted by COVID-19, to defer their monthly payroll tax payments until 21 July 2020. A business is directly or indirectly affected if the current turnover, profit, customers, bookings, retail sales, supply contracts or other factors, compared with normal operating conditions, have been directly or indirectly affected by COVID-19.

If you have any queries on these various federal or State concessions, please contact Peter Hong.

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