Instant Asset Write and Commercial Investment properties
Even before COVID hit, the ATO was ramping up the Instant Asset Write-Off. It has increased quite drastically in the last couple of years in particular. At the time of writing the instant asset write-off stands at $150,000. That’s per asset you have purchased or acquired as part of a commercial property purchase.
Most business owners are well aware this covers office equipment, laptops, tools, and vehicles to name a few. Many are unaware it also covers Plant and Equipment in commercial properties. Even fewer know that you don’t need to go out and buy new equipment to claim it.
Plant and equipment items that you acquire as part of a property purchase do qualify for the instant asset write off.
What are the common plant and equipment items in a commercial property?
- Air Conditioning components
- Garage door motors
- Security sensors and alarm systems
- Kitchen appliances (commercial kitchens and offices )
Items that aren’t considered permanent or structural are generally classified as plant and equipment.
How to know if you’re entitled to the Instant Asset Write-Off?
The Instant Asset Write-Off is designed to encourage business spending, so entities like trusts and SMSFs that own commercial property may not be eligible. Entities that are carrying on a business are generally entitled. It’s always best to check with your accountant.
You can still claim Depreciation on Plant and Equipment
When you do own the property under an entity that isn’t entitled to the Instant Asset Write-Off you still get to claim a deduction. Rather than writing off the asset immediately, you can claim a yearly depreciation deduction. That continues until the asset reaches the end of its effective life as determined by the ATO.
What About Commercial Fitout?
Many businesses lease their premises from a landlord, but have spent significant sums on commercial fitout. This could be anything from partitioning office space into offices and meeting rooms, to setting up a commercial kitchen.
Commercial Fitout that’s left behind
During 2020 in particular, the hospitality sector was hard hit and tenants may have moved out and leave their fitout behind. Often, title to that fitout passes to the landlord as compensation for rent owed and/or a lease being broken. The Instant Asset Write-Off or depreciation may be able to be claimed on that fitout subject to an accountant’s advice.
Temporary Full Expensing
As of 30/10/2020 a new temporary full expensing measure is available for businesses with a turnover of less than $50 Billion for new assets. This also applies to second hand assets, however, for second hand assets, the threshold drops to a $50Million turnover.
Temporary full expensing is not a permanent measure as the name suggests. It will expire on 30/06/2022. A key difference between temporary full expensing and the instant asset write-off is that there is no asset value threshold for temporary full expensing, just a turnover threshold.
The Latest On The Instant Asset Write-off
There have been a number of changes to turnover and asset value thresholds in the last few years. We’ve included a table for reference below.
|Eligible businesses||Date range for when asset first used or installed ready for use||Threshold|
|Less than $10 million aggregated turnover||12 March 2020 to 30 June 2021, providing the asset is purchased by 31 December 2020*||$150,000|
|Less than $10 million aggregated turnover||7.30pm (AEDT) on 2 April 2019 to 11 March 2020||$30,000|
|Less than $10 million aggregated turnover||29 January 2019 to prior to 7.30pm (AEDT) on 2 April 2019||$25,000|
|Less than $10 million aggregated turnover||1 July 2016 to 28 January 2019||$20,000|
|Less than $2 million aggregated turnover||7.30pm (AEST) on 12 May 2015 to 30 June 2016||$20,000|
|Less than $2 million aggregated turnover||1 January 2014 to prior to 7.30pm (AEST) 12 May 2015||$1,000|
|Less than $2 million aggregated turnover||1 July 2012 to 31 December 2013||$6,500|
|Less than $2 million aggregated turnover||1 July 2011 to 30 June 2012||$1,000|
If you’d like to keep up to date with the latest developments, this page on the ATO website is a great starting point. https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/Simpler-depreciation-for-small-business/Instant-asset-write-off/
Applying the correct and current rules can be quite complicated and it’s highly recommended to consult with your accountant.