The Australian Taxation Office (ATO) has released a guide, on 30 June 2024, detailing the criteria for small businesses to claim the AUD 20,000 instant asset write-off (IAWO).

Additionally, the ATO has also issued guidance on how to claim the small business energy incentive starting on 1 June, 2024.

Guidance on small businesses can claim instant asset write-off (IAWO)

On 9 May 2023, Australia’s Government, as part of the 2023–24 Budget, announced it would improve cash flow and reduce compliance costs for small businesses by temporarily increasing the instant asset write-off threshold to AUD 20,000 from 1 July, 2023, until 30 June, 2024.

This announcement has been signed into law.

Small businesses with an aggregated turnover of less than AUD 10 million can immediately deduct the total cost of eligible assets costing less than AUD 20,000 that are first used or installed for use between 1 July, 2023, and 30 June, 2024.

Small businesses that have claimed an immediate deduction for an asset under the simplified depreciation rules in a prior income year can also immediately deduct an amount included in the second element (cost addition) of that asset’s cost, where the amount is:

• The first amount of the second element cost incurred after the end of the income year in which the asset was written off;
• Less than AUD 20,000;
• Incurred between 1 July, 2023, and 30 June, 2024.

The AUD 20,000 threshold applies on a per asset basis, so small businesses can instantly write off multiple assets.

Assets valued at AUD 20,000 or more can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that. In addition, pool balances under AUD 20,000 at the end of the 2023–24 income year can be written off.

Guidance on how small businesses can claim energy incentive 

Businesses (with an aggregated annual turnover less than AUD 50 million) will have access to a bonus 20% tax deduction with the small business energy incentive. This applies to new assets, or improvements to existing assets, that support more efficient energy use.

Eligible assets must be both first used or installed ready for use for any purpose, and used or installed ready for use for a taxable purpose, between 1 July, 2023, and 30 June, 2024.

Eligible improvement costs must also be incurred during this period to be eligible for the bonus deduction.

Up to AUD 100,000 of total expenditure is eligible under the incentive. The maximum bonus deduction is AUD 20,000 per business.

When claiming the incentive, small businesses must ensure they have accurate records that provide evidence of the expenditure they claim and can show and explain how they compared different assets when upgrading or making improvements.

What small businesses can’t claim

Small businesses can’t claim:

• Assets and expenditure on assets that can use a fossil fuel;
• Assets and expenditure on assets that have the sole or predominant purpose of generating electricity (such as solar panels);
• Capital works;
• Motor vehicles and expenditure on motor vehicles;
• Expenditure allocated to software development pools;
• Financing costs.