The temporary full expensing rules, which provided an immediate deduction for the full cost of assets acquired from 6 October 2020, ended on 30 June 2023. While the instant asset write-off threshold was due to drop back to $1,000 from 1 July 2023, the Government has introduced a Bill to Parliament which contains amendments to ensure that a $20,000 threshold will apply to small business entities for the 2024 income year. This bill is still before parliament and has not yet been legislated.
For a small business entity to access the instant asset write-off threshold of $20,000 the following conditions need to be satisfied:
- The entity must carry on a business under general principles in the 2024 income year.
- It must have aggregated annual turnover of less than $10m – this can be based on current year or previous year figures.
- It must choose to apply the simplified depreciation rules for the 2024 income year.
- The asset must have a cost of less than $20,000; and
- The asset must be first used, or installed ready for use, for a taxable purpose between 1 July 2023 and 30 June 2024.
It is important to note that if a small business entity does not choose to apply the simplified depreciation rules for the 2024 income year, then it won’t have access to the instant asset write-off rules, regardless of whether the other basic conditions can be met.
The write-off threshold applies per asset, so a small business entity can potentially deduct the full cost of multiple assets across the 2024 year if the cost of each asset is less than $20,000.
The increased instant asset write-off threshold also means that a $20,000 threshold applies for the purpose of determining whether the full pool balance is written off in the 2024 income year. Just remember, that when you are applying these rules you don’t actually examine the closing pool balance, you are identifying what the pool balance would have been if you ignored the current year depreciation deductions for the pool for the 2024 year.
The provisions that prevent small business entities from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended until 30 June 2024 (the lock-out rules).
What assets are eligible
The instant asset write-off rules only apply to assets that fall within the scope of the depreciation provisions. Expenditure on capital improvements to buildings that fall within the scope of the capital works rules do not qualify.
Assets with a cost of $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business general pool and depreciated at 15% in the first income year and 30% each income year thereafter.
The messy history of depreciation deductions
A range of measures have been introduced over the years to encourage business investment. A summary of the rules is set out below:
|Aggregated Turnover Threshold||Initiative||Date Range For When Asset First Used Or Installed Ready For Use||Cost Threshold|
|Less Than $10 Million*||Instant Asset Write-Off||1 July 2023 To 30 June 2024||$20,000|
|Less Than $5 Billion||Temporary Full Expensing||6 October 2020 To 30 June 2023||N/A|
|Less Than $500 Million||Instant Asset Write-Off||12 March 2020 To 30 June 2021||$150,000|
|Less Than $50 Million||Instant Asset Write-Off||7.30pm (AEDT) On 2 April 2019 To 11 March 2020||30,000|
|Less Than $10 Million||Instant Asset Write-Off||29 January 2019 To 7.30pm (AEDT) On 2 April 2019||$25,000|
|Less Than $10 Million||Instant Asset Write-Off||1 July 2016 To 28 January 2019||20,000|
|Less Than $2 Million||Instant Asset Write-Off||7.30pm (AEST) On 12 May 2015 To 30 June 2016||$20,000|
|Less Than $2 Million||Instant Asset Write-Off||1 January 2014 To Prior To 7.30pm (AEST) 12 May 2015||1,000|
|Less Than $2 Million||Instant Asset Write-Off||1 July 2012 To 31 December 2013||$6,500|
|Less Than $2 Million||Instant Asset Write-Off||1 July 2011 To 30 June 2012||1,000|