2023 Instant asset write off and the thresholds to claim

The best lesson any new business can learn is that an accountant is an ally you will rely upon, and when it comes to anything to do with your business and tax, you should speak to them directly. 

• Utes capable of more than one tonne are eligible
• Up to $150,000 instant asset write-off for businesses
• New or used utes maybe be eligible

So when you see things in the news about “instant asset tax write-off” and “benefits for small businesses”, you will want to get on the phone to your tax specialist first and foremost, because they will be best equipped to help you navigate the complexities of the regulations. 

Per the Australian Tax Office: “Eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used or installed ready for use.” Currently this applies to assets first purchased and used between 6 October 2020 and 30 June 2023.

In English, it means you can fully depreciate the cost of an asset in the same tax year as you bought it. Often you will write off assets over a period of years, but that’s not the case with the instant asset rule. That’s why it has “instant” in the name. 

Australian businesses (such as sole traders, partnerships, companies, and trusts) that have a total annual income less than $5 billion are eligible for new asset write-off, but if your business’s aggregated turnover is less than $50 million, eligible second-hand assets can also be written off under the rules.

In simple terms, you can spend up to $150,000 on a new or used asset for your business - but don’t go rubbing your hands together about that sparkly Audi RS4 just yet. 

The “Car Limit” threshold for a car for the 2022–23 financial year is $64,741. 

But, under the guidelines stated by the ATO, a car is defined as a vehicle “designed to carry a load less than one tonne, and fewer than nine passengers”. Those vehicles are subject to the threshold amount of $64,741 – the amount over that price point can’t be claimed under other depreciation rules.

So let’s consider an example of that threshold in action.

 A business owner decides to spend $90,000 on a passenger car, which they use for their business 70% of the time, while 30% of the time is for personal use. That means the total deduction for the vehicle would be 70% of the threshold amount - so, $45,318.70.

However, vehicles that are designed to carry more than one tonne (like most utes) or nine passengers or more (mini buses), are eligible for a total instant tax write-off, up to a maximum price of $150,000.

That means, if you buy a work vehicle for the purpose of work, and it costs you $90,000, you can claim the entire purchase price back. That could be huge, but be careful as most dual cab utilities are not eligible to claim 100 percent of the cost.

The small business asset write-off initiative was introduced in the COVID period as a means to keep the economy stimulated. Money makes the world go around, even if the world seemed to stop on its axis for a while there. 

At the time of writing, this scheme was due to wrap up at the end of June, 2023. (This may change in the May budget).

The asset write-off must be claimed in the fiscal year it was used for business purposes. So, say you buy a ute on May 31 2023, you need to use it for business by 30 June 2023 to claim it as a tax deduction for the 2022-2023 year.

In other words, if you’re waiting on your new Ranger ute for work, and the dealership is saying “it should be here by August”, you might miss out on the chance to claim this instant write-off.

Note: Not intended as tax advice. Consult your accountant, tax advisor or the ATO to come up with a solution to suit your needs.