Looks like it’s official.  The ATO has issued an update on the instant write-off eligibility.

Changes made:

• Instant asset write off eligibility extended to 31 December 2020;
• New and second-hand assets;
• Assets purchased after 7.30 pm (AEDT) on 2 April 2019 but not first used or installed for use until 12 March 2020 to 31 December 2020;
• Instant asset write off eligibility will revert to businesses with an aggregated turnover of less than $10 million and the instant write-off threshold will be $1,000 from 1 January 2021.

What stays the same ?

• Instant asset write-off threshold is still $150,000 (up from $30,000);
• Multiple assets as long as the cost of individual assets is less than the threshold;
• Eligible business threshold increases from $50 million to $500 million;
• Excluded assets including leased for more than 50% of the time on a depreciating asset lease, assets allocated to low value pool, horticultural plants, software allocated to a software development pool and capital works deductions;
• Eligibility test.

Well, if all things are equal, then a purchase of a property (contract exchanged after 2^nd of April 2019 and settled between 12^th of March and 31 December 2020) by an eligible business, would see the new owner of the asset be able to claim an immediate deduction for all depreciating assets within the property that is less than $150,000.

The purchase consideration paid for the property will include land, building, depreciating assets and probably non qualifying assets. This is where we are able to assist in establishing the opening value of depreciating assets (on an individual asset basis) and determine if individual assets may qualify for the instant asset write off.

Here is an opportunity to realise some cashflow value for potential new acquisitions.

Please contact one of our registered tax practitioners for any assistance:

	MELBOURNE John Mathew Director o.  03 9915 6300 m. 0414 559 326 e.  jmathew@napierblakeley.com		NATIONAL Paul Mazoletti National Director o.  07 3221 8255 m. 0408 749 202 e.  pmazoletti@napierblakeley.com
	SYDNEY Peter Osborn Director o.  02 9299 1899 m. 0439 765 571 e.  posborn@napierblakeley.com		BRISBANE Kath Hemphill BDM – Tax QLD o.  1300 730 382 m. 0409 722 709 e.  khemphill@napierblakeley.com

On the 9^th of June 2020, the government announced that it will extend the $150,000 instant asset write off until 31 December 2020.  This proposed change is not law yet as of today 16^th of June 2020.

At the time of writing this, it is still unclear what the intent of the changes will mean for property owners and acquired depreciating assets as part of a property transaction.  The ATO suggests that eligible businesses will be able to use the instant asset write-off provisions for the business portion of the cost of an assets in the year the asset is first used, or installed ready for use.

What does first use mean? 

Date of original commissioned plant?

Does this mean that a “second-hand asset” that is currently in place and has been previously been “put in use” at the time of purchase by an eligible entity will not qualify?

Or is it a question of first use by the acquirer of the asset?

Example:

Joe Blogs Pty Ltd acquires an office building for investment (capital growth and income) The entity is deemed to be carrying on a business in accordance with TR2019/1 (another conversation for another day) and is eligible to claim the instant write off.

• The office building is 5 years old.
• Settlement occurs on the 20^th of July 2020.

Is the 20^th of July the first use date by Joe Blogs Pty Ltd and therefore the depreciating assets would qualify for the instant write off provisions?

It would make sense that it would, as if Joe Blogs Construction Pty Ltd (JBC) purchased a $130,000, 5 year old backhoe for their construction business and the first use date was the 20^th of July 2020, then the second-hand asset would qualify as being put to use on that date.

If this is the intent of the government, it is indeed good news for the economy.

We at N&B are here to help.  Please do not hesitate to contact one of our trusted advisors for further assistance:

	MELBOURNE John Mathew Director o.  03 9915 6300 m. 0414 559 326 e.  jmathew@napierblakeley.com		NATIONAL Paul Mazoletti National Director o.  07 3221 8255 m. 0408 749 202 e.  pmazoletti@napierblakeley.com
	SYDNEY Peter Osborn Director o.  02 9299 1899 m. 0439 765 571 e.  posborn@napierblakeley.com		BRISBANE Kath Hemphill BDM – Tax QLD o.  1300 730 382 m. 0409 722 709 e.  khemphill@napierblakeley.com