As expected, the Federal budget confirmed that the asset write-off incentives have been given a shake-up.

6 June 2023

Up to 30 June 2023, businesses under $5 billion in turnover were able to claim the full expensing of an unlimited number of new eligible assets with no capped dollar value. Businesses with a turnover of up to $50 million could also claim the full expensing of second-hand assets.

However, all this is about to change. What does this mean for your business?

Prepare for changes.

The thresholds for the instant asset write-off have been significantly reset as follows:

• The full cost of eligible assets costing less than $20,000 that are first utilised or installed ready for use between 1 July 2023 and 30 June 2024 will be instantly deductible for small businesses with a combined turnover of less than $10 million.

• Small businesses will be able to immediately write down a number of assets because the $20,000 threshold will be applied on a per item.

• For assets above $20,000 the small businesses simplified depreciation pool can continued to be used at a rate of 15% in the first income year and 30% in subsequent income years.

Businesses should carefully consider the basis and method used to depreciate assets in this and the next financial year before muted changes may be brought to bear as the ATO begins to concentrate on reaching the Budget targets set for it by the government for an increased “tax” take.

Are new rules on the horizon?

Businesses today may face a challenge with the conclusion of the scheme mentioned in the Budget as it could herald the return of a tax depreciation regime that could be more onerous.

Business owners may need to consider the Budget opportunity to buy assets qualified for the instant write-off, and then, perhaps, not fall into a reduced depreciation regime that is slower in writing off assets and more time-consuming in classifying and calculating.

Businesses in industries that rely largely on physical assets stand to suffer the most if the write-off regime reverts to old system.

So what does this mean for Electric Vehicles?

The Tesla Model 3 at $65,500 (before on-road expenses) will be over $20,000 threshold, and therefore not subject to the instant asset write-off from 1 July 2023, assuming use as a business vehicle etc.

Nevertheless, one should keep in mind the ATO rules that "Employers do not pay FBT on eligible electric cars and related car expenses beginning July 1, 2022."

If the salary packaging meets all of the requirements, there won't be any FBT in the calculations, allowing the use of a novated lease to buy a car, again, like the Tesla Model 3. This model, at this price, doesn’t reach the luxury car threshold.

Additionally, related charges like registration, insurance, repairs, maintenance, and fuel or energy costs for charging, if they are paid for a qualifying electric automobile, are also exempt from FBT, lowering the ongoing costs of a fully maintained vehicle.

Professional advice

Of course there are rules around claiming under the full expensing incentives up to 30 June 2023 and the instant asset write-off regime from 1 July 2023 to 30 June 2024.

If you need help, we are here to see what can be legitimately claimed.