The $20k Instant Asset Write-Off Threshold has been Reintroduced by New Legislation

Treasury Laws Amendment Bill 2023 (Support for Small Business and Charities and Other Measures)

On 13 September 2023, it was introduced into the House of Representatives (not yet law)

An immediate deduction has been provided under the temporary full expensing rules for the full cost of assets obtained from October 6, 2020, ended on June 30, 2023. From 1 July 2023, the instant asset write-off threshold was due to drop back to $1,000, a bill has been introduced by the government to Parliament that consists of amendments to make sure that a $20,000 threshold will apply to small business entities for the 2024 income year.

The Rules to Access Instant Asset Write-Off Threshold of $20k

To get access to an instant asset write-off threshold of $20k for small business entities, the following rules need to be met:

  • The entity must run a business under general principles in the 2024 income year
  • Its aggregated annual turnover must be less than $10m;
    • depending on the current year or past year figures
  • It needs to apply the simplified depreciation rules for the 2024 income year
  • The asset needs to have a cost of less than $20k, and
  • The asset must be installed ready for use or first used, for a taxable purpose between July 1, 2023 and June 30, 2024.

If a small business entity doesn’t apply the simplified depreciation rules for the 2024 income year, then it can’t access instant asset write-off rules, irrespective of whether the other basic conditions can be satisfied.

The write-off threshold applies per asset, so as long as the expense of each asset is less than $20k, a small business entity can deduct the full cost of various assets across the 2024 year. The increased instant asset write-off threshold means that a $20k threshold applies to check whether the full pool balance is written off in the 2024 income year. Don’t forget that when you apply for these rules, you don’t pay attention to the closing pool balance, you consider checking what the pool balance would have been if you didn’t pay attention to the current year depreciation deductions for the pool for 2024 income year.

The provisions that stop small business entities from entering again the simplified depreciation regime for 5 years if they opt out will be suspended until 30 June 2024.

What Assets Are Eligible?

The rules of instant asset write-off are applicable to assets that come under the scope of the depreciation provisions. Expenses on capital improvements to buildings that come under the scope of the capital works rules are not eligible.

Assets that cost $20,000 or more can continue to be included in the small business general pool and depreciated at 15% in the first income year and 30% every subsequent income year. These assets cannot be promptly written off.

The History of Depreciation Deductions

Over the years, several measures have been introduced to promote business investment. The following list shows a brief summary of the rules:

Aggregated turnover thresholdInitiativeDate range for when asset was first used or installed ready for useCost Threshold
Less than $10 million*Instant asset write-off1 July 2023 to 30 June 2024$20,000
Less than $5 billionTemporary full expensing6 October 2020 to 30 June 2023n/a
Less than $500 millionInstant asset write-off12 March 2020 to 30 June 2021$150,000
Less than $50 millionInstant asset write-off7.30 pm (AEDT) on April 2, 2019 to 11 March 202030,000
Less than $10 millionInstant asset write-off January 29, 2019 to 7.30 pm (AEDT) on 2 April 2019$25,000
Less than $10 millionInstant asset write-off1 July 2016 to 28 January 201920,000
Less than $2 millionInstant asset write-offon 12 May 2015 7.30 pm (AEST) to 30 June 2016$20,000
Less than $2 millionInstant asset write-off1 January 2014 to 12 May 2015 before 7.30 pm (AEST)1,000
Less than $2 millionInstant asset write-off1 July 2012 to 31 December 2013$6,500
Less than $2 millionInstant asset write-off1 July 2011 to 30 June 20121,000