Instant Asset Write-Off on Business Sale Acquisitions

A key aspect of the Australian Government’s support for businesses and employers in response to COVID-19, has been an increase to the instant asset write-off for eligible businesses.

The instant asset write-off has increased for the period from 12 March 2020 to 31 December 2020:

  • Threshold for immediately deductible assets is $150,000 (up from $30,000)
  • Eligibility range covers businesses with an aggregated turnover of less than $500 million (up from $50 million)

From 1 January 2021, the instant asset write-off will only be available for small businesses with a turnover of less than $10 million and the threshold will be $1,000. (Source: ATO)

From a business sale transaction perspective:

  • Each asset purchased costing less than the threshold ($150,000) can be immediately written off for tax purposes.
  • The instant asset write-off can be used for new and second-hand assets (assets used and purchased from another entity).
  • The assets must be installed and ready for use by 31 December 2020 meaning settlement of the transaction must have occurred on or before this date.

DMA is aware of a recent deal where settlement was held up (for reasons external to Coronavirus), which settled shortly after announcement of this incentive. A good tax result for the buyer.

Eligibility is straight forward in a sale of business assets. Eligibility in share sales is more complex and will generally require the shares to be consolidated into the buyer’s tax group.

Independently of the JobKeeper and cash flow boosts to employer incentives, the increase to the instant asset write-off thresholds presents an opportunity for investors who can move quickly.

Disclaimer: The above does not constitute financial advice. Please contact your registered tax advisor to confirm eligibility.


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