18Mar
By: Agriquip Editor On: March 18, 2020 In: Blog Comments: 0

The government has announced a suite of measures aimed at stimulating the economy off the back of the World Health Organisation (WHO) declaring the Coronavirus a pandemic.

The package will see two measures that may be of assistance for new and used machinery purchases through Agriquip by LandHQ. A summary of the measures and links for more information is below.

Supercharged Instant Asset Write-Off

The instant asset in increased write-off threshold by fivefold, rising from $30,000 to $150,000 for new or second‑hand assets first used or installed ready for use until 30 June 2020.

Access to the write-off will also be expanded to include businesses with aggregated annual turnover of less than $500 million, up from $50 million.

Businesses will be able to immediately deduct purchases of eligible assets, each costing less than $150,000. The threshold applies on a per asset basis, so eligible businesses can immediately write‑off multiple assets.

Depreciation Deductions Accelerated. 50 Per Cent of Asset Cost Deductible in the Year of Purchase

Businesses with a turnover of less than $500 million will also now be able to deduct an additional 50 per cent of the asset cost in the year of purchase, as the government looks to introduce a time-limited 15-month investment incentive.

Examples of how the Instant Asset Write-off can help your business

Business Benefits from Increased Asset Threshold

Owen owns a company, ON Point Farms Pty Ltd, through which he operates a farming business in Goulburn, New South Wales Australia. ON Point Farms Pty Ltd has an aggregated annual turnover of $25 million for the 2019‑20 income year. On 1 May 2020, Owen purchases a second hand tractor for $140,000, exclusive of GST, for use in his business.

Under existing tax arrangements, ON Point Farms Pty Ltd is not able to immediately deduct assets costing more than $30,000 and instead would depreciate the tractor using an effective life of 12 years. Choosing to use the diminishing value method, ON Point Farms Pty Ltd would claim a tax deduction of $3,899 for the 2019‑20 income year.

Under the new $150,000 instant asset write‑off, ON Point Farms Pty Ltd would instead claim an immediate deduction of $140,000 for the purchase of the tractor in the 2019‑20 income year, $136,101 more than under existing arrangements. At the company tax rate of 27.5 per cent, Owen will pay $37,427.78 less tax in 2019‑20.

This will improve ON Point Farms Pty Ltd’s cash flow and help his business withstand and recover from the economic impact of the Coronavirus.

Source: https://www.business.gov.au/risk-management/emergency-management/coronavirus-information-and-support-for-business/instant-asset-write-off

This article originally appeared on LandHQ’s website.

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