How Your Business Can Take Advantage of the $30,000 Instant Asset Write Off

When it comes to small business, cash flow is king, and being able to invest in your business is crucial. Earlier this year the Federal Government announced it would extend the instant asset write-off for another year, and in the Budget announcement, the Treasurer has added another sweetener for small business - extending the threshold to $30,000.

With the end of the financial year just around the corner, now is the time you should be looking to take advantage of the instant asset write-off to give your business a boost.

What is the instant asset tax write-off?
The instant asset tax write off enables businesses to instantly deduct assets instead of claiming deductions over a number of years.

The latest amendments to the instant asset write-off mean there are now three tiers for the 2019 income year:

• Tier 1: $20,000 threshold for depreciable assets acquired before 29 January 2019 - small businesses with a turnover of less than $10 million
• Tier 2: $25,000 threshold for assets acquired between 29 January 2019 and 2 April 2019 - small businesses with a turnover of less than $10 million
• Tier 3: $30,000 threshold for assets acquired between 2 April and before 1 July 2020 - small businesses with a turnover of less than $10 million and medium-sized businesses with an aggregated annual turnover of $10 million or more, but less than $50 million

The threshold applies on a per asset basis, so eligible businesses can instantly write-off multiple assets that are first used, or installed ready for use, from their respective tier dates.

Using the write-off to your advantage
 Using the instant asset write-off to its full effect means looking at the bigger picture and examining how you can make the tax break work for your business beyond simply pocketing the tax saved. There’s nothing to be gained by simply spending money for the sake of a tax break. You need to consider how you can use the tax break to lift your business to the next level so that investment leads to higher profitability and productivity going forward.

Below are a few examples of how businesses can take advantage:

Example 1: Bill owns an automotive spray painting business. He has used the instant asset write-off to replace his 8-year-old rotary screw air compressor. The model he’s replaced it with, at a cost of $16,000, is much more recent and consequently produces better quality air, is more reliable and 30% more energy efficient; his costs of servicing are down, energy consumption is lower and he is achieving a higher quality finish. Bill has made a great investment in his business that will help to reduce costs, productivity and potentially increase customer satisfaction and profitability.

Example 2: Dayle is a wheat farmer in Dumbleyung, Western Australia. Every year, Dayle uses a portable diesel air compressor to blow down his machinery during harvesting. After many years of reliable use, Dayle’s old air compressor had started to give him more bad days than good. Knowing it was nearing the end of its service life, Dayle decided to use the instant asset write-off to upgrade his compressor to the latest model. Since Dayle was going to have to replace the compressor in the next couple of years anyway, he was wise to invest now while he could take advantage of the incentive and reap the benefits of having a reliable working asset.

Example 3: Meghan runs a medium-sized winery that bottles its wine on-site. As part of the bottling process, Meghan uses nitrogen gas. Up until now, she had purchased bottled liquid nitrogen on a regular basis to keep up with site-demand. Using the instant asset write-off, Meghan purchased an on-site nitrogen generator that integrated with her existing compressed air system. This has allowed her to save between 40-80%, depending on current liquid nitrogen prices. With a payback period of less than two-years, on-site generation delivers Meghan a continuous supply of gas at the purity, pressure and flow she requires, on site and on demand.

Example 4: Nick is a construction contractor who often uses power generators to deliver prime power to his work sites. Up until now, Nick had been hiring generators but found that, over time, the cost of hiring the equipment had been adding up. The cost, coupled with the inconvenience of not always having a machine readily available, convinced him that buying a generator could be a worthy investment for his business. Using the instant asset write-off, Nick purchased a low-noise, fuel-efficient trailer-mounted generator, allowing him to easily transport it from site to site. The model he purchased not only met all of his requirements but also retains great resale value should he wish to upgrade in future.

How CAPS can help your business
 CAPS is Australia’s largest locally owned supplier of compressed air and power generation equipment. In response to the instant asset write-off, we are offering great deals on selected equipment under $30,000, in stock and ready to deliver before the end of financial year. This equipment features the latest technology in efficiency and performance, allowing you to make a wise investment that will drive your business forward. View our select range of equipment under $30,000 here or get in touch with your local team today to discuss your business requirements on 1800 800 878 or info@caps.com.au

***This article does not provide professional tax advice and should be used as a guide only. If you are unsure of how the instant asset write-off applies to you, please seek advice from a registered tax agent, your accountant or business advisor prior to any purchase.