# ATO: $20,000 instant asset write-off



## Jack Malarkey

*From the Australian Taxation Office's Small Business Newsroom:*

*$20,000 instant asset write-off*









*8 June 2018*

If you buy an asset by 30 June and it costs less than $20,000, you can write off the business portion in your 2018 tax return.

You are eligible to use simplified depreciation rules and claim an immediate deduction for the business portion of each asset (new or second hand) costing less than $20,000 if:
you have a turnover less than $10 million (increased from $2 million on 1 July 2016), and
the asset was first used or installed ready for use in the income year you are claiming it in.
Assets that cost $20,000 or more can't be immediately deducted. They will continue to be deducted over time using the general small business pool. You write off the balance of this pool if the balance (before applying any other depreciation deduction) is less than $20,000 at the end of an income year.

The $20,000 threshold applied from 12 May 2015 and will reduce to $1,000 from 1 July 2018.

In the latest Federal Budget, there is a proposal to extend the $20,000 instant asset write-off threshold to 30 June 2019. This change is not law yet.

Remember, registered tax agents and BAS agents can help you with your tax.

*Find out about:*

What's new for small business
Simpler depreciation for small business

(https://www.ato.gov.au/Newsroom/sma...0,000-instant-asset-write-off/?sbnews20180619)


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## Jack Malarkey

The Bill to extend the closing date of the $20,000 instant asset writeoff by one year from 30 June 2018 to 30 June 2019 is currently before Parliament, having been introduced on Thursday 24 May 2018.

The title of the Bill is the Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Bill 2018.

The Bill had its third reading agreed to (ie, is on the verge of being passed) in the House of Representatives on Tuesday 19 June 2018 and will await consideration and passage by the Senate and Royal Assent.

For complete information about this Bill, please see https://www.aph.gov.au/Parliamentar...slation/Bills_Search_Results/Result?bId=r6118.

The Parliamentary Library has prepared a Bill Digest for this Bill that includes the following information on page 4:

'Policy position of non-government parties/independents

'The Australian Labor Party (ALP) supports the extension of the instant asset write-off for small business.

'In the lead up to the 2016 Federal Election, the Australian Greens supported the $20,000 instant asset write-off.'

(http://parlinfo.aph.gov.au/parlInfo...d_binary/6027969.pdf;fileType=application/pdf)


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## WestSydGuy

Great info, thank you Jack.

I was looking at an Uber select approved car, with low fuel usage, the $20k limit means a used Merc C200 fits the bill. Hmmmm.

Jack, how would this instant write off apply to the part time Uber driver? If they earnt $60k in their full time job... Asking for a friend.


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## Jack Malarkey

WestSydGuy said:


> Great info, thank you Jack.
> 
> I was looking at an Uber select approved car, with low fuel usage, the $20k limit means a used Merc C200 fits the bill. Hmmmm.
> 
> Jack, how would this instant write off apply to the part time Uber driver? If they earnt $60k in their full time job... Asking for a friend.


Thanks, WestSydGuy.

The rules themselves for claiming the $20,000 instant asset writeoff are the same for a part-time business as for a full-time business.

Keep in mind, however, the potential interaction with what are known as the 'non-commercial losses' rules if the instant asset writeoff deduction would give rise to a loss from the rideshare business.

Under the non-commercial losses rules, you cannot usually claim a loss from a business against other income in the current year unless the assessable income from the business is at least $20,000.

Instead, the loss is quarantined and carried forward to be offset against any business profits in future years.

'Assessable income' for a rideshare driver would be gross fares including the amount paid as a service fee (commission).

A part-time driver is less likely to have assessable income from the rideshare business of at least $20,000.

For more information about the non-commercial losses rules, see https://www.ato.gov.au/Business/Non-commercial-losses/.

More generally, there are circumstances where it's better for a driver to claim depreciation over, say, four or five years rather than all in the one year under the instant asset writeoff.

Here are the current tax rates for a resident individual: https://www.ato.gov.au/Rates/Individual-income-tax-rates/.

Let's say that a driver buys a car for $15,000 and that their taxable income (ie, assessable income minus deductions) without the depreciation claim is $40,000.

By claiming all of the $15,000 in the one year, all but $3,000 of the claim will give rise to a tax saving of 21 cents in the dollar (including savings in the 2% Medicare levy).

On the other hand, claiming the $15,000 as $3,000 a year over five years, our driver enjoys a tax saving of 34.5 cents in the dollar (including Medicare levy savings) for the total cost.

That's a difference of 13.5 cents in the dollar on $12,000 of the claim (a big $1,620).

The moral here is that you shouldn't assume it's always in your best interest to claim the instant asset writeoff rather than regular depreciation.


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## Sydney Uber

$20,000 would almost cover my Summer UberJetSki


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## Jack Malarkey

The Australian Taxation Office has advised that the $20,000 cost upper limit for the instant asset writeoff is exclusive of GST for a taxpayer registered for GST.










(https://www.ato.gov.au/Business/Dep...on---rules-and-calculations/?anchor=Cost#Cost)


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## Jack Malarkey

The Bill to extend by 12 months to 30 June 2019 the period during which small business entities can access the $20,000 instant asset writeoff is before the Senate with the second reading being moved on 25 June 2018.

Both Houses of Parliament next sit on Monday 13 August.










(https://www.aph.gov.au/Parliamentar...slation/Bills_Search_Results/Result?bId=r6118)


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## Jack Malarkey

The Bill to extend by 12 months to 30 June 2019 the period in which small business entities can access the $20,000 instant asset writeoff was passed by both Houses on 12 September 2018 and has received Royal Assent, meaning that it is now law.

https://www.aph.gov.au/Parliamentar...slation/Bills_Search_Results/Result?bId=r6118


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## BuckleUp

Hmm, does a giant mint candy making machine count? Could package them up and ebay to ants all over the world. Small fortune to be made for an enterprising king ant.


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## Sydney Uber

Jack Malarkey said:


> The Bill to extend by 12 months to 30 June 2019 the period in which small business entities can access the $20,000 instant asset writeoff was passed by both Houses on 12 September 2018 and has received Royal Assent, meaning that it is now law.
> 
> https://www.aph.gov.au/Parliamentar...slation/Bills_Search_Results/Result?bId=r6118


May I ask Jack? Do you/did you have a Accountancy /ATO/ FED Govt public service background ? Your understanding of all things parlimentary and Tax is at an impressive level.


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## Jack Malarkey

Sydney Uber said:


> May I ask Jack? Do you/did you have a Accountancy /ATO/ FED Govt public service background ? Your understanding of all things parlimentary and Tax is at an impressive level.


Thanks, Sydney Uber. You guessed right! 

I worked in the Australian Taxation Office from 1979 to 2002 and then in the Revenue Group of the (federal) Treasury from 2002 to 2012 on tax policy and legislation.


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## Sydney Uber

Jack Malarkey said:


> Thanks, Sydney Uber. You guessed right!
> 
> I worked in the Australian Taxation Office from 1979 to 2002 and then in the Revenue Group of the (federal) Treasury from 2002 to 2012 on tax policy and legislation.


Thanks for your openness and insight.

Was the ATO aware/positive back in 2011-2012 about the opportunity that UBER was bringing to the ATO?

Single-handedly UBER has migrated a predominantly "Black Economy" found in the Taxi/HC industries through in-app payments and forcing legacy networks to do the same. As a long term operator, it's an unfair playing field when your quotes are constantly beaten by 15-30% by operators who have no plans to pay tax.

When did the "light bulb" switch on as to how good UBER would be for improving tax receipts?


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## Jack Malarkey

Sydney Uber said:


> Thanks for your openness and insight.
> 
> Was the ATO aware/positive back in 2011-2012 about the opportunity that UBER was bringing to the ATO?
> 
> Single-handedly UBER has migrated a predominantly "Black Economy" found in the Taxi/HC industries through in-app payments and forcing legacy networks to do the same. As a long term operator, it's an unfair playing field when your quotes are constantly beaten by 15-30% by operators who have no plans to pay tax.
> 
> When did the "light bulb" switch on as to how good UBER would be for improving tax receipts?


I don't really know.

Uber began operations in Australia after I had retired. But I suspect you're correct. A system that contemplates universal payment by credit card was always going to be a good match for the Tax Office's data matching program.


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## Sydney Uber

Jack Malarkey said:


> I don't really know.
> 
> Uber began operations in Australia after I had retired. But I suspect you're correct. A system that contemplates universal payment by credit card was always going to be a good match for the Tax Office's data matching program.


Would it be an easy process for the ATO, and it's access to driver activity through Rideshare outfits, to spot any overseas Students who are doing more than their 20 allowable work hours by working multiple Rideshare and food delivery platforms?


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## phred

Jack Malarkey said:


> A system that contemplates universal payment by credit card was always going to be a good match for the Tax Office's data matching program.


Spot on - same for Uber and Taxi sectors. Similarly, both sectors still have their black economies with cash fares and tips


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## Jack Malarkey

Sydney Uber said:


> Would it be an easy process for the ATO, and it's access to driver activity through Rideshare outfits, to spot any overseas Students who are doing more than their 20 allowable work hours by working multiple Rideshare and food delivery platforms?


There isn't a legislative underpinning for this to happen. The Tax Office is authorised to pass on information to the Department of Home Affairs but its original collection of information needs to be related to taxation. The number of hours someone works in a given period isn't relevant in a taxation context.


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## Sydney Uber

Jack Malarkey said:


> There isn't a legislative underpinning for this to happen. The Tax Office is authorised to pass on information to the Department of Home Affairs but its original collection of information needs to be related to taxation. The number of hours someone works in a given period isn't relevant in a taxation context.


That's interesting. There's no legislative underpinning because it's not neccesary.

I imagine that the information pipeline on driver activity and earnings from UBER to the ATO is well established by now. Dept of Home Affairs wouldn't even need to liaise with UBER. It would be easier for them with the recent improvements of inter-agency data exchange to simply get filtered statistics on known Students logging onto Rideshare/delivery platforms.

The traditional Taxi networks through process and convention would still be an irritant to the ATO and Home Affairs Dept because there relative lack of automated data flow available.


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