Instant Asset Write Off Scheme

Instant Asset Write Off Scheme

The current scheme

The instant asset write-off scheme provides immediate tax deductions for eligible businesses for new or second-hand plant and equipment asset purchases such as vehicles, tools or office equipment used for tax-deductible purposes.

On 12 March 2020, as part of the Government’s stimulus package in response to the COVID-19 pandemic, changes were made to the instant asset write off scheme that would remain in effect until 30 June 2020.

The changes from 12 March 2020 include:

  • the instant asset write off threshold being increased from $30,000 to $150,000
  • the eligibility being expanded to cover businesses with an aggregated turnover of less than $500 million (up from $50 million)

The above changes apply from 12 March until 30 June 2020 for applicable assets first used or installed ready for use in this timeframe. As such, eligible businesses will be able to claim an immediate deduction for depreciating assets that cost less than $150,000. There are, however, limitations that apply, including a car limit that applies to passenger vehicles: the limit is $57,581 for the 2019–20 income tax year. Further, if your asset is for business and private use, you can only claim the business portion.

It is important to note that the scheme cannot be used for assets that are excluded from the simplified depreciation rules, including:

  • assets that are leased out, or expected to be leased out, for more than 50% of the time on a depreciating asset lease;
  • assets you allocated to a low-value assets (pool) before using the simplified depreciation rules;
  • horticultural plants including grapevines;
  • software allocated to a software development pool (but not other software)
  • capital works deductions – for example new buildings and certain improvements.

Further details on the scheme can be found HERE on the ATO website.

Extension to current scheme

On 9 June 2020, the Government announced that it will be extending the changes to instant asset write-off scheme that was due to end on 30 June 2020 for a further six months until 31 December 2020. The proposed extension is still subject to parliamentary processes and is not currently in force yet.

Without the extension, the $150,000 instant asset write-off threshold would have reverted back to its original level of $1,000 and would only be eligible to businesses with a turnover of less than $10 million from 1 July 2020.

Key considerations

The instant asset write-off scheme can help improve cash flow for your business by bringing forward tax deductions.

  • The threshold applies on a per asset basis, which means that multiple assets can be written off immediately, provided that each asset costs less than the $150,000 threshold – for example the business can purchase 4 trucks each for $150,000 and claim the tax deduction on each truck.
  • The asset must be first used or installed ready for use for tax-deductible purposes during the period 12 March 2020 to 30 June 2020 – to be extended to 31 December 2020.
  • With the extension to 31 December 2020, eligible businesses will have additional time to acquire and install assets so the deduction can be applied in the timeframe with the increased threshold allowance.

Purchasing the Asset

If you have been planning to invest in assets to help grow your business – now is a great time to do it!

If the business does not have the funds readily available, it may be able to borrow to fund the purchase of the assets and still be eligible for the immediate tax deduction.

If the business is utilising a finance facility to buy multiple assets, it will also be able to claim the deduction on each of the assets, provided that each asset costs less than the $150,000.

Please feel free to reach out if you are considering taking advantage of the current scheme and purchasing an asset or multiple assets through finance. We can provide you with advice on the finance documentation and structure of any finance facility to ensure your business’s interests are best protected.

We can also provide assistance and act on your behalf in securing an asset. In particular if second-hand plant and equipment asset purchases are being negotiated and purchased by way of a deed of sale or contract.

Eligibility under the scheme

Determining your eligibility under the instant asset write off scheme and whether the assets you intend to invest in are covered under the scheme is not a straight forward task.  We can provide you with specific advice tailored to your current situation and help navigate through the current scheme under the Tax Laws and the new regimes in place as part of the government’s response to the COVID-19 pandemic.

Should you require assistance as to your eligibility for the instant asset write off scheme or have any general enquiries, please do not hesitate to contact us.

Written by Kristina Ghobar


Legislative and practical relief to bankrupts during COVID-19

On 13 March 2020, the World Health Organisation categorised COVID-19 as a pandemic.

In recent JHK Legal articles we have outlined the relief for individuals and businesses during the COVID-19 era and the temporary changes to safe harbour provisions. View those recent articles here:

Relief for individuals and Businesses during the Covid-19 era

Temporary Changes to Safe Harbour Provision

This article deals with the relief provided to bankrupts during the COVID-19 crisis and considers the position of the trustees in bankruptcy during this period.

AFSA Guidelines

As at the date of this article, there are no legislative restrictions on trustees of bankrupt estates in carrying out their powers as a result of the COVID-19 pandemic. Notwithstanding this, the Australian Government have been vocal with their expectations, that parties work together to obtain short-term agreements (including extensions of time or delay of payments).

As a result of the government’s position, the Australian Financial Security Authority (AFSA) have released general guidelines for trustees[1]. Overall, AFSA recommend a degree of leniency should be afforded to bankrupts where appropriate however the needs of creditors should remain a priority and the estate should otherwise be administered in a timely manner.

Some of the AFSA guidelines include:

  1. Where an estate can still be administered, it is expected that it will be administered in a timely manner;
  2. There may be some estates that cannot be progressed and the reasons need to be documented on file in sufficient detail to satisfy any parties seeking access to the estate file that any delay is reasonable;
  3. Trustees are expected to continue to take the necessary steps now to secure assets but only to the extent that they are able to do so without exposing staff to risk;
  4. While there may be delays in being able to deal with a property (for example restrictions on real estate agents conducting open house inspections), it is important that actions to secure property are not delayed, if this can be safely completed.
  5. As the Australian Government has announced a nationwide six-month moratorium on evicting renters, trustees should avoid evicting parties from properties. It may be difficult for such parties to find alternative accommodation particularly where their income has been reduced (either partly or wholly), where they have become unwell or have unexpected caring responsibilities at this time.
  6. Trustees must be conscious that bankrupts may not be able to provide information as quickly as requested.
  7. Any renegotiation of payment schedules with contributors must be balanced with the bankrupt’s need to repay their liability, noting they may be in a less favourable position to repay the liability at a later time. At the same time, the trustee must be mindful that some creditors, particularly small creditors, may be relying on dividends from a bankrupt estate to keep their business operating.

Practical relief for bankrupts

So, what does this mean for bankrupts? There may be the ability to discuss and attempt to negotiate extensions of time or variations to payment schedules with a trustee in bankruptcy if a bankrupt is affected by COVID-19.

Reasonable evidence that a bankrupt has been affected by one or more of the following will likely be required (please note this list not exhaustive):

  1. Loss of employment;
  2. Reduction in income;
  3. Tested positive for COVID-19;
  4. Been in mandatory self-isolation; and/or
  5. Increased and unexpected caring responsibilities.

Practical effects for bankruptcy practitioners

While a trustee must be mindful of certain parties being affected by COVID-19, a trustee still needs to continue performing their obligations under the Bankruptcy Act 1966 (Cth).

Trustees should try to obtain written evidence of any temporary or permanent loss of employment or reduction in income to able to document sufficiently the reason for any leniency provided to bankrupts.

If any Court applications are commenced by trustees to seek to obtain orders to deal with the assets of a bankrupt estate, it is likely that trustees will need to evidence to the Court that a level of reasonableness has been provided to bankrupts who have been affected by COVID-19 and sufficient evidence of the same has been provided. Depending on the situation, a trustees may consider allowing bankrupts with longer periods of time than usual to complete certain steps.

There is no question that applying the AFSA guidelines and completing the trustee’s obligation of administering a bankrupt estate in a timely manner will be a difficult balancing act for bankruptcy practitioners.

How can we help you

Whether you are a bankrupt or a bankruptcy practitioner, JHK Legal can assist you with any queries you may have.

JHK Legal has an extensive knowledge in the insolvency area and we can provide legal advice based on your specific circumstances. If this article may be relevant to your circumstances or if you have any general enquiries, please do not hesitate to contact us.

Written by Simone Wilson



[1] https://www.afsa.gov.au/about-us/newsroom/practitioners-covid-19-and-updated-advice-inspector-general

Update regarding commercial lease negotiations

Regulations to give effect to the National Cabinet mandatory code of conduct announced by Scott Morrison on 7 April 2020 have been released and taken effect in Queensland.

Generally speaking, the regulations provide that parties to “affected leases” are provided with additional rights.

An affected lease is any binding retail shop lease or lease of premises used wholly or predominately for business activities under which:

(a)       the lessee is an SME entity, i.e. has an annual turnover of less than $50,000,000.00; and

(b)       the lessee or, in some limited cases, an affiliate of the lessee) is eligible for the jobkeeper scheme.

The new obligations and rights include:

  • A general obligation on the parties to act reasonably and in good faith between each in discussions and actions associated with mitigating the effect of the COVID-19 emergency;
  • Restrictions on the rights of lessors to enforce and terminate leases and guarantees and securities provided under affected leases during the period 29 March 2020 to 30 September 2020;
  • Deferral of rent increases under leases required during the period 29 March 2020 to 30 September 2020;
  • Rights for lessors to reduce services to premises during any period of closure by a lessee;
  • Mechanisms for the negotiation and renegotiation of rent reductions and waivers during the period 29 March 2020 to 30 September 2020 which include mediation and QCAT proceedings where there is dispute or enforcement is required.

Take aways 

  •  Clarity of the rights of the parties and process to reach resolution has finally be released;
  •  Clarity has now been given as to what financial information lessors and lessees are required to provide each other regarding their negotiations;
  • Landlords can initiate the negotiation process and bring a tenant to account and ultimately procure resolution by QCAT order if a tenant has not been acting reasonably or in good faith or has simply been refusing to pay rent;
  • Landlord’s can take their own circumstances into account in negotiation rental waivers and deferrals;
  • Clarity has been given on the timing and term for payment of any deferred rent;
  • An enforcement process exists for both parties in the event of any default on any negotiated outcome;
  • Bank guarantees and security bonds are able to be held and used a security for payment of deferred rent;
  • To avoid argument and the enforceability of the parties’ respective rights, any agreement regarding negotiated outcomes should be properly and appropriately documented between the parties
  • The parties can make agreement outside the requirements of the regulations.

Ultimately, there is now finally some certainty for lessors and lessees regarding their respective rights arising from the announced of the National Cabinet mandatory code of conduct announced on 7 April 2020.

We have prepared and have ready low cost processes and documents to help bring lease negotiations arising under the regulations to a swift conclusion.  Should you require any assistance with any of the matters arising from the regulation of COVID19, please do not hesitate to contact us.

Written by Niall Powell, Special Counsel.

 A more detailed summery of the regulations can be downloaded here