Use the instant asset write off scheme to get a fast tax deduction on earthmoving equipment
If you’re looking to buy used earthmoving equipment, now is the perfect time. If you buy an asset for your business, such as a second-hand excavator, you can access a fantastic tax benefit from the ATO.
Our used equipment specialist, Natasha Haddad, takes you through what you need to know.
The ATO’s instant asset write off scheme is a deduction that businesses can use to instantly claim large expensive assets in the same way you claim everyday small expenses like PPE.
Introduced back in 2011, this government scheme helps Aussie businesses reap the tax benefits of investing in new or second-hand plant and equipment, and with the end of the financial year looming, it’s a great time to learn more about taking the tax benefits available to your business.
How much is the instant asset write off?
Prior to 2020, the threshold amount was just $30,000. However, in March 2020 the government bumped up this tax break to a whopping $150K, allowing more businesses to take advantage of buying larger plant and equipment.
With this new threshold of $150,000, you can significantly lower your taxable income by writing off your new machine as an expense, rather than having to calculate complicated asset depreciation over time.
This easier approach has been hugely successful over the past couple of years and as a result, the government has extended the measure to include a Temporary Full Expensing (TFE) scheme, which is essentially an extension of the asset write off scheme.
What is Temporary Full Expensing?
Temporary Full Expensing is basically the ‘new and improved’ instant asset write off. This new scheme was introduced in October and allows for even more tax benefits for businesses. There is no threshold amount for this scheme, so the $150K limit doesn’t apply: you can claim assets that are much higher in value if you choose to.
How to claim used equipment on tax
If you’re a business turning over less than $50 million per year, you can claim a tax deduction for big-ticket assets such as excavators.
This applies to used equipment too, not just new machines.
Plus, it’s not limited to one purchase – you can claim multiple assets as long as each individual machine is under the threshold amount.
Note that if your business turns over more than $50 million, you can still access the tax benefit, however, second-hand equipment isn’t eligible.
Find out more about claiming earthmoving equipment on tax
With both the asset write off and the temporary full expensing schemes, it’s important to note that the government doesn’t actually cover the cost of your equipment – it’s purely a way to reduce the amount of tax you have to pay.
Take a look at our range of earthmoving equipment for sale or get in touch with Orange Hire to find out more.
For a full explanation of the rules and limitations, and to check your eligibility, take a look at the Australian Taxation Office website.