Instant asset write-off: How to use temporary full expensing to benefit your business’s bottom line

COVID-19 saw many great assistance schemes from the government to benefit small businesses. Temporary full expensing serves the government’s goal of stimulating the economy by encouraging businesses to spend money on equipment and enjoy immediate tax savings. Rather than wait three to 10 years to write off an asset, you can write it off in one go.

Before you rub your hands together in glee in anticipation that you will get a huge whack of cash into your account straight after your purchase, it’s important to know that this scheme does not give you cashback — it reduces your taxable income and therefore your tax payable.

For example, if a business purchases $100,000 of eligible equipment, and assuming it trades through a company with a 25% tax rate, it will save $25,000 in tax for the year. In real terms, the asset will have cost the business $75,000. For businesses turning over less than $50 million, they also get to expense second-hand assets.

What is considered an asset?

Generally, an asset is anything you would have depreciated in previous tax returns.