The Bill amends the income tax law to allow a business with an aggregated turnover for the income year of less than $500 million to immediately deduct the cost of a depreciating asset (instant asset write-off). The asset must cost less than a threshold of $150,000 and be first used or installed ready for use for a taxable purpose by 31 December 2020. Without the amendments the $150,000 instant asset write-off would end on 30 June 2020.
The Bill also amends the income tax law to allow a larger business (with an aggregated turnover for the income year of $10 million or more and less than $500 million) that has adopted a substituted accounting period to access the $150,000 instant asset write-off for an asset first used or installed ready for use for a taxable purpose from 12 March 2020 until 31 December 2020. Equivalent amendments are also made to allow an eligible business that has adopted a substituted accounting period to access the $30,000 instant asset write-off prior to 12 March 2020 regardless of when their income year ends.
By extending the previous end date of 30 June 2020 to 31 December 2020, the amendments give businesses additional time to access the $150,000 instant asset write-off for their investments, including those investments that have been delayed by supply chain disruptions. Further, the amendments extend cash flow support to businesses through the early stages of the recovery from the economic conditions caused by COVID-19. It will be interesting to see if this timeframe is further extended at some later point.
Note that, come 1 January 2021, if there is no further extension, the $150,000 threshold will collapse to $1,000 and the turnover of less than $500 million criteria will fall to a turnover of less than $10 million.