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Cashflow is vital for a business to succeed. As part of yearly tax planning activities, Australian Tax Office (ATO) designed a legislation that allows $20,000 instant asset write-off scheme which will benefit the small business sector as it will reduce expenses and stabilise cash flow. This scheme was introduced in the 2015 Federal Budget; this allows businesses to get an immediate tax deduction on every asset purchased for less than $20,000.
Businesses that fulfil the requirement of a small business entity will be eligible for this, which is businesses with a turnover of less than two million dollars are entitled to claim an immediate deduction for the cost of depreciating assets purchased for less than $20,000.
This scheme includes acquisition of both used and new assets. Any number of assets whose cumulative value sums up to be less than $20,000 would qualify for the write-off. All assets are eligible for this, except for few which receive different depreciation treatment. These assets include:

  • Horticultural plants: based on their own uniform capital allowance (UCA) rules; 
  • Capital works: based on their own “capital works” depreciation rules; 
  • Assets which involve low-value or software depreciation pool: subject to the depreciation rules under those pools;
  • Primary production assets: as per ATO, taxpayers can choose to use the accelerated depreciation or specific UCA rules;
  • Leased assets: assets leased out to another party on a depreciating asset lease.

An example will be a restaurant, run as a company. The business purchases a new stove for $12,000 and a new fridge for $6,000. Under the $20,000 threshold, the company will be able to claim an immediate deduction for both the new stove and fridge, giving an immediate deduction of $18,000. With the new small business company tax rate of 28.5% from 1 July 2015, the company will get $5,130 back on its tax. So, under the $20,000 threshold for depreciation, the company would receive an additional cash flow benefit of $5,130.  

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