Use the IAWO (Instant Asset Write Off) Scheme to secure tax benefits this EOFY
What is the IAWO Scheme?
The IAWO Scheme is a temporary tax deduction that is available to eligible businesses purchasing depreciating assets. The IAWO scheme has been extended to include the current financial year, so your business can still reap the benefits.
Eligible businesses can claim immediate tax deductions for the full cost (excluding GST) of the qualifying asset. There is no limit to the number of new eligible assets and no restrictions on the dollar value of the asset either.
- annual business turnover must be under $5 billion
- depreciating assets purchased must be installed and ready for use by 30 June 2022
- depreciating assets may include new business equipment and vehicles (with non-exempt motor vehicles being capped at the depreciation cost limit for 2021-22 of $60,733)
- businesses that have an aggregated turnover of less than $50 million can use the scheme to purchase second-hand assets
- deduction claims may be made for the year in which the equipment is used or installed ready for use
- businesses can borrow funds to purchase the asset and still claim a deduction for the cost of eligible items (leasing of assets is excluded)
Benefits of the IAWO scheme:
- Assist with growth – Reduce the cost of business expansion
- Lessen the impact on your business’s cash flow – Borrow using existing equipment/other assets as security
- Flexibility – payments can be structured around your business’ cash flow
- Lower monthly payments – decrease recurring payments by structuring a balloon/residual payment at the end of the loan term
Assets that will be used for both business and personal purposes
Businesses can only claim tax deductions for the percentage of the asset that will be used for business use.
For instance, if an asset is used 40% on personal and 60% on business use
New asset: $60,000
Business use (60%): $36,000
Personal use (40%): $24,000
The total amount eligible under the IAWO scheme: $36,000
For a detailed overview of the IAWO scheme, please visit the ATO website. If you think your business could benefit from the IAWO scheme, please contact your Pacific Finance Broker on 08 9321 2120, or send us an email via firstname.lastname@example.org
Disclaimer: Please note this does not constitute taxation advice and you should seek clarification from your normal taxation advisor.