Small business instant asset write-off threshold to increase

As part of the 2023–24 Federal Budget, an increase in the small business instant asset write-off threshold was announced to support small businesses. A bill proposing to enact this measure has now been introduced in the Parliament.

With the temporary full expensing (TFE) incentive available to small and medium businesses with a turnover of less than $5 billion, ending on 30 June 2023, this measure was announced to relieve small businesses from high inflation and other market volatility pressures.

Eligibility criteria

The following conditions must be satisfied to be eligible for the instant asset write-off:

• The asset must be first installed or ready to use between 1 July 2023 and 30 June 2024

• The asset must cost less than $20,000

• The annual aggregated turnover of the business must be less than $10 million (s 328-110 ITAA 1997)

The $20,000 threshold will apply on a per-asset basis, so small businesses can instantly write off multiple assets.

Future prospects

For the 2022–23 income year, under the TFE rules, you can immediately deduct the business portion of an asset's cost if you start to hold or have installed ready for use the asset for a taxable purpose before 30 June 2023 (no threshold applies to the cost of the asset).

Post the enactment of this measure, the cost (business portion) of any assets you purchase, start to hold, or have ready to use (installed) between 1 July 2023 to 30 June 2024 can be fully deducted if below the $20,000 threshold. This deduction may be claimed in your 2023–2024 income tax return.

The amendments also extend the deferral of the 5-year "lock-out" rule for the small business simplified depreciation rules to 30 June 2024. Therefore, you can continue to re-enter the simplified depreciation system if you choose to opt-out at some point before 30 June 2024.

Contact us

We will update you as this bill progresses through the parliamentary approval process. Please get in touch with our office if you need more information about this proposed tax incentive.