The Federal Budget’s Further Extensions for Instant Asset Write-off

Posted on 13/10/2020

Tax Advisory

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The Federal Budget's latest round of Stimulus measures provides some key opportunities for businesses and organisations to invest in their operations. In this article, we explore how the Instant Asset Write-off announced on 6 October 2020 works, using the example of the Hospitality and Clubs industries.
instant asset write-off

The latest round of Instant Asset Write-Off changes

With the acceptance of BNA (Bank Note Acceptors) and TITO (Ticket In Ticket Out) coming into effect on 30 July 2020, many clubs and hospitality venues who have gaming rooms are assessing their ability to install and upgrade their fleet of machines.

Regardless of whether you have gaming on-site or not, we’ve been working with a number of clients to help them balance the cost of general upgrades, while ensuring they can capitalise on the Federal Government’s increase in instant asset write-offs that are part of the current COVID-19 stimulus package, and as expanded under the 2020-21 Federal Budget.

As of the latest version included in the Federal Budget, released 6 October 2020, here are the key points to remember:

  • The asset/s must be purchased between 7 October 2020 and 30 June 2022.
  • The asset/s can be new or used and can be purchased via private sale (except for large businesses with a turnover of $50 million or more, who are able to apply the write-off to new assets only).
  • There is no limit on the cost of the asset purchased.
  • Eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used or installed ready for use.
  • The scheme is available to any business hat has an aggregated turnover of less than $5 billion.
  • The asset must be used or installed ready for use by 30 June 2022.

While the instant asset write-off is designed so that it can be used for a wide range of business purchases, there are some restrictions and limitations that operators and owners should be wary of. It’s worth checking with your accountant or tax adviser for more information on your individual circumstances.

It is important to note that while the scheme is designed to reduce the amount of tax your business or organisation pays, if it is structured as a company, the benefit you will receive is equal to 26% (for small businesses) or 30% (for large businesses) of the cost of the asset (i.e. the relevant tax rates).


Financing your Instant Asset investment

In terms of financing your purchase, it is important to keep in mind that most banks require any or all of the following information:

  • Financial statements and tax returns.
  • Tax returns and statements of position for any beneficiaries/guarantors.
  • A list of all of your business’ financial commitments.
  • Your latest Business Activity Statement (BAS).
  • Bank statements.

The turnaround times for approval will vary depending on the lender, the facility you require and the time of year.

As an example, the turnaround time for equipment finance facilities can be approximately 48 to 72 hours from the time you provide all necessary paperwork; however, for overdrafts and term debt facilities the timeframe can be longer. A seasoned finance broker can help streamline the process, working hand-in-hand with your accountant or business adviser to ensure that all the requirements for the application are met and presented in the way that the specific lender you are going to will respond best to.

“A seasoned broker has access to an extensive network and can target the most appropriate lenders to meet your specific needs. They should be negotiating competitive terms, rates and facilities on your behalf,” explains Bruce Debenham, Director of Perks Banking & Finance.

“For many businesses and organisations that we’ve worked with, the bank is sometimes not best-suited to meet the objectives of the business – it can depend on a number of considerations, such as whether you are looking at equipment financing, or working capital, and the timeframes you need it in.”


Investing in your business processes and systems

While upgrades always factor at the top of the list for many owners and operators, for those that are still managing their books and finances off of spreadsheets, another opportunity could be investing in the digitisation of your accounting practices. As we discussed in one of our previous articles, Knowledge is Power and integrating technology can help you centralise and mine your various systems for financial insights, cut-down on manual errors and reduce admin time. The key benefit of taking your business off Excel spreadsheets and into real-time reporting is that it will allow you to make more timely decisions regarding your business and pivot where necessary.

If you are thinking about taking advantage of the instant asset write-off, it is important to note that the asset can only be claimed for a deduction in the year the asset is first used, or installed ready for use. In this case, the asset (or assets) must be installed and ready for use prior to the deadline of 30 June 2022. So if, for example, you purchase some new gaming machines in May 2022, but they won’t be delivered and operational until July 2022, they won’t be eligible as you will have exceeded the deadline.

If you are considering a purchase for your business, either the 2020-21 or 2021-22 Financial Years would be an opportune time to do this.

Our advice? Don’t hold off on running the numbers and securing any necessary finance so that you can strike while the iron is hot.


Talk with our Tax Advisory Team.

Brian Nimmo

Brian Nimmo

Brian specialises in providing high level taxation advice. Tax consulting across corporate tax, capital gains tax and international tax, to ATO product and class rulings for managed investment schemes.

Neil Oakes

Neil Oakes

Providing tax consulting advice to small, medium and large enterprises, with specific focus in the aged-care and property industries.

Talk with our Tax Advisory Team.

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