Small business instant asset write-off deduction threshold to increase

As part of the 2023–24 Federal Budget, an increase in the small business instant asset write-off threshold was announced to support small businesses.

A bill proposing to enact this measure has now been introduced in the Parliament.

Eligibility criteria

The following conditions must be satisfied in order to be eligible for the instant asset write-off:

• The asset must be first installed or ready to use between 1 July 2023 and 30 June 2024
• The asset must cost less than $20,000
• The annual aggregated turnover of the business must be less than $10 million.

The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets.

Future prospects

For the 2022–23 income year, under the temporary full expensing (TFE) rules, you can immediately deduct the business portion of an asset's cost, if you start to hold or have installed ready for use the asset for a taxable purpose before 30 June 2023 (no threshold applies to the cost of the asset).  On 1 July 2023 the threshold for the immediate write-off of depreciable assets purchased by small businesses reverted to $1,000.

Post the enactment of this new measure, the cost (business portion) of any assets you purchase, start to hold, or have ready to use (installed) between 1 July 2023 to 30 June 2024 can be fully deducted if below the $20,000 threshold. This deduction may be claimed in your 2023–2024 income tax return.

The amendments also extend deferral of the 5-year “lock-out” rule for the small business simplified depreciation rules to 30 June 2024, therefore you can continue to re-enter the simplified depreciation system if you choose to opt-out at some point before 30 June 2024.

With the TFE incentive, which was available to small and medium businesses with a turnover less than $5 billion, ending on 30 June 2023, this measure was announced to provide small businesses relief from high inflation and other market volatility pressures.

Please feel free to contact our office if you need more information about this proposed tax incentive.

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