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.
This article originally appeared on LandHQ’s website.