Instant Asset Write-Off from $30,000 to $150,000
As part of the Carona Virus stimulus package released on 12 March 2020 the Australian Government announced an increase in the instant asset write-off from $30,000 to $150,000. This means that a car, furniture, equipment or other items used in Family Day Care up to the value of $150,000 purchased on or after 12 March 2020 to 30 June 2020 may be claimed as a deduction in full in the year of purchase. This concession does not apply to assets purchased before 12 March 2020. For any assets purchased prior to 12 March 2020 the following summarises the applicable dates and amounts in relation to claiming the full cost of assets in the 2018-2019 and 2019-2020 financial year.
1 July 2018 to 28 January 2019 - Assets costing less than $20,000
29 January 2019 to 2 April 2019 - Assets costing less than $25,000
3 April 2019 to 11 March 2020 - Assets costing less than $30,000
12 March 2020 to 30 June 2020 - Assets costing less than $150,000
Any asset you purchased under the amounts noted may be claimed as a full deduction based upon the date it was purchased and installed / ready for use as outlined.
This measure provides a significant tax planning opportunity for any educator needing to reduce their income for tax purposes and considering purchasing a new car or other significant item of equipment for their family day care business.
Important: Considerations BEFORE making your purchase Before you go out and spend big on that new car or other item, there are some very important things to consider:
This concession only applies to cars, furniture, computers or other items of equipment. It DOES NOT APPLY to building improvements such as extensions or renovations to either your home or outdoor areas.
You will only be able to claim the portion of the asset purchased so far as it relates to your family day care business. For example, if you are buying a car and you expect to use it only 50% of the time for Family Day Care, you will only be able to claim 50% of the cost as a deduction.
Ask yourself whether the asset you wish to purchase is an absolute business necessity. Educators can sometimes mistakenly go and spend money on items for the sole purpose of obtaining a tax deduction. Believe it or not, if you do not really need the item, you may better off keeping your money and paying tax on the profit rather than buying something you don't really need.
Consider whether you should purchase the asset before the end of the current financial year, or in the new financial year. For example, if your taxable income is expected to be low the financial year and you expect your income to be higher next financial year, it may still be wise to hold off your purchase until after 1 July 2020 in order to get the maximum amount tax savings. Speak to your Accountant about some tax planning (or do the calculations yourself) to estimate your income and determine the best course of action for your individual circumstances.
Finally, $150,000 is a very significant investment for any educator. If due to the timing of this announcement you are unable to speak to your Accountant, FDC Tax are offering a free question and answer service in relation to this concession. You can contact us on 1300 FDC TAX (1300 332 829) or email us at info@fdctax.com.au.
