2024 Tax Planning Series: Leveraging Tax Benefits Through Strategic Asset Acquisition

For many businesses, the temporary instant asset write off ceased on the 30th June 2023. However, from the 1st July 2023, the instant asset write off is still applicable for small businesses (with a turnover of under $10M), provided the cost of the asset does not exceed $20,000.

This threshold applies to each asset individually, allowing a small business to potentially claim the immediate deduction for multiple assets. As long as the cost of each asset does not exceed $20,000.

For depreciable assets exceeding the threshold of $20,000, depreciation is claimed in the small business pool. The applicable rates are 15% in the first year of use, 30% per annum each year thereafter.

Buying assets can offer significant tax advantages. When acquiring assets for your business, take advantage of the instant asset write-off and consider financing the purchase with a loan. Here is how to implement this strategy:

Asset Selection

Select assets that are eligible for tax benefits, such as depreciable assets or those that qualify for immediate write-off under the instant asset write-off scheme. Examples of eligible assets include computers, office furniture, tools and equipment, forklifts, motor vehicles, and machinery.

Timing of Purchase

Ensure that the asset is purchased and first used or installed ready for use by the end of this financial year.

Structure the Loan so that it is Tax Efficient

Consider structuring the loan in a tax-efficient way. For instance, if the asset is exclusively used for business purposes, the interest on the loan might be tax-deductible. However, if the asset is also used personally, only the portion of interest related to its business use is deductible.

Keep Detailed Records

Keep detailed records of the asset purchase, loan agreement, and any other related documents. This will help you substantiate your claim for the instant asset write-off and any tax deductions related to the loan.

Consider Cash Flow

While the instant asset write-off provides a tax benefit, consider the impact of the loan repayments on your business’s cash flow. Ensure that you can comfortably meet the repayments while maintaining your business operations.

Review Finance Options

Compare financing options available for the asset purchase, including interest rates, loan terms, and any fees or charges. Choose the option that best suits your business’s financial position and tax planning objectives.

If you would like to purchase an asset for your business with finance, please contact Brett Elliot, our Lending and Finance Principal on 03 8419 9800 or 0409 402 086 , for an obligation-free discussion. Brett can help you with:

  • Car Loans
  • Equipment Finance
  • Small Business Loans
  • Business Overdraft Loans

Plan Carefully

By carefully planning the purchase of the asset and the financing arrangement, you can maximise the tax benefits available and improve your business’s financial position.

Consult with your accountant to ensure that you meet all the eligibility criteria for the instant asset write-off and to optimise the tax benefits of the asset purchase and loan.

Don’t forget to book in your tax planning meeting with your accountant prior to 30 June.

This content has been prepared by Wilson Pateras to further our commitment to proactive services and advice for our clients, by providing current information and events. Any advice is of a general nature only and does not take into account your personal objectives or financial situation. Before making any decision, you should consider your particular circumstances and whether the information is suitable to your needs including by seeking professional advice. You should also read any relevant disclosure documents. Whilst every effort has been made to verify the accuracy of this information, Wilson Pateras, its officers, employees and agents disclaim all liability, to the extent permissible by law, for any error, inaccuracy in, or omission from, the information contained above including any loss or damage suffered by any person directly or indirectly through relying on this information. Liability limited by a scheme approved under Professional Standards Legislation. 

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