As we head towards 30 June, now is the time for brokers to have a chat with their small business clients about the instant asset write off.
The 2024 Federal Budget delivered great news for small businesses, with the extension of the $20,000 instant asset write-off (IAWO) for another 12 months1.
It means businesses can potentially have two bites of the same cherry – taking advantage of the IAWO in the current financial year, and writing off an additional $20,000 next financial year. There are no guarantees the IAWO will last beyond 30 June 2025.
Why is the IAWO so appealing?
The IAWO allows eligible businesses to claim an immediate tax deduction for the full cost of equipment costing under $20,000.
Not only does this give a business an immediate tax break, but it also allows for better alignment of the cash outgoings with the tax saving.
Without the IAWO, plant and equipment must be written off in line with its useful life. So, it can take years for the cost of an item to work its way through a venture’s tax returns.
What are the rules?
It is always a good idea for a business owner to speak with their tax professional to know for sure if the venture is eligible for the IAWO.
In general, though, these key rules apply2:
The IAWO can be claimed by small businesses with aggregated turnover of less than $10 million
The full cost of the asset must be below $20,000, and
The asset must be first used or installed ready for use before 30 June 2024 to be claimed in the current financial year.
What kinds of ‘assets’ are eligible?
Essentially, the assets that can be claimed under the IAWO will vary according to the type of business.
A café, for example, may invest in new tables and chairs, or a new espresso machine. A retail outlet may choose to spend up to $20,000 on new shelving and display cabinets.
Other assets that may be claimed include:
- Technology, such as laptops, computers, EFTPOS systems and security equipment
- tools, plant and equipment
- office furniture
- motorbikes, and
- solar systems.
The assets purchased don’t have to be brand new. They can be second-hand. The critical aspect is that the cost sits below $20,000. In theory, a car or vehicle can be eligible for the IAWO as long as it costs less than $20,000.
What’s exciting is that the Australian Taxation Office (ATO) spells out that the $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets3.
Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that4.
For the record, brokers may also be able to claim the IAWO in their own business!
Conversations to have with your small business clients
With only days remaining for your clients to take advantage of the tax savings offered by the IAWO – and the productivity benefits of new equipment – it’s critical to have conversations now around funding for new assets.
Time really is of the essence – remember the asset needs to be up and running by 30 June to be eligible.
That’s where OnDeck’s Lightning Loans come to the rescue.
“Our Lightning Loans are available from $10,000, and we can get the funds to your small business clients at lightning speed,” says Cameron Poolman, CEO of OnDeck.
He adds, “Our unique KOALA Score™ is a sophisticated predictive business lending model. So, unlike some lenders, we don’t need any upfront security to guarantee a loan, giving customers that additional peace of mind.
“It also enables us to offer larger loans or better terms and to give your clients access to their loan sooner, as our loans can be approved in as fast as 2 hours.”
We make it easy for brokers too.
Applications are made online with just 6 months’ worth of business bank statements, with your application confirmed in minutes.
The bottom line is to pick up the phone, and share the good news with your small business clients. The new asset their business needs could also deliver a handy tax break – but they do need to act fast!
You can visit the ATO website to find out more about Instant Asset Write-Off or speak to one of our dedicated broker support team. Visit our partner page or email broker@ondeck.com.au.
[1] https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/small-business-support-20000-dollar-instant-asset-write-off
[2] https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/small-business-support-20000-dollar-instant-asset-write-off
[3] https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/small-business-support-20000-dollar-instant-asset-write-off
[4] https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/small-business-support-20000-dollar-instant-asset-write-off
This article is for general information purposes only. Content may belong to or have originated from third parties and OnDeck takes no responsibility for the accuracy, validity, reliability or completeness of any information
OnDeck cannot give tax advice. Any tax considerations outlined in this document are general statements, based on an interpretation of current tax laws, and do not constitute tax advice. As such, you should not place reliance on any such taxation considerations as a basis for making your decision with respect to the product. As the tax implications of investing in a OnDeck product can impact individual situations differently, you should seek specific tax advice from a registered tax agent or registered tax (financial) adviser about any liabilities, obligations or claim entitlements that arise, or could arise, under a taxation law.
The time frame required to process and fund loan applications may vary for each individual application. Factors such as the completeness and accuracy of application materials, verification processes, and external circumstances can influence the processing & funding timelines.
