The Instant Asset Write-Off (IAWO) has officially become law for the 2023-2024 financial year, offering significant tax relief opportunities for eligible small businesses. If your business has an aggregated annual turnover of less than $10 million, this is an important update that could benefit your bottom line.
Understanding the Instant Asset Write-Off
The Instant Asset Write-Off allows small businesses to immediately deduct the full cost of eligible assets costing less than $20,000 rather than depreciating these costs over several years. This applies to both new and second-hand assets that are first used or installed and ready for use between 1st July 2023 and 30th June 2024. Notably, the $20,000 threshold applies on a per-asset basis, meaning you can claim multiple assets as long as each one is under the threshold.
This tax deduction can be a game changer for small businesses, providing immediate relief by reducing taxable income. However, it’s essential to remember that you can only claim the business portion of the asset. Proper records must be maintained to prove the purchase and its business use.
The Role of Your Bookkeeper
Navigating the IAWO can be complex, which is where your Bookkeeper becomes an invaluable asset. They play a crucial role in tracking all asset purchases and installations, ensuring that each asset is accurately recorded with the correct purchase dates and costs.
Your Bookkeeper works closely with your Tax Agent to monitor asset costs and ensure they fall below the $20,000 threshold. At the end of the financial year, they will highlight any eligible equipment purchases to your Tax Agent to ensure they are correctly claimed on your tax return. This meticulous process helps maximise your business’s benefits from the IAWO, ensuring compliance and optimal tax outcomes.
If you’re uncertain whether your Bookkeeper is managing these essential tasks, it’s time to have a discussion. Ensuring your asset purchases and records are up-to-date is crucial in gaining the maximum benefit for your business.
Looking Ahead to 2024-2025
The recent Budget also announced that the Instant Asset Write-Off measure will continue into the 2024-2025 financial year. However, it has yet to be law and is subject to parliamentary approval. Keep an eye on updates to ensure your business can continue to take advantage of this valuable tax deduction.
Visit the ATO’s official page on the Instant Asset Write-Off for more detailed information and to check your eligibility.
(Article sourced from the Institute of Certified Bookkeepers)
