How the instant asset write-off works

Here is a case study of how the instant asset-write-off works:

Early Bird Café is a business registered for GST with a turnover of $5m.

• On 12 December 2018, Early Bird Café paid $16,500 (and was entitled to a GST credit of $1,500) for a counter top for the new café extension which opened for business after all construction was completed on 17 January.

An immediate tax write-off of $15,000, as the counter was first used before 28 January.

• On 27 January 2019, Early Bird Café took delivery of a walk-in refrigerator, but it was not installed and ready for use until 6 February 2019. Payment of $25,300 including GST was made on 27 April 2019.

An immediate tax write-off of $23,000 as the walk-in refrigerator was installed and ready for use before 2 April 2019. Delivery and payment dates are not taken into account. The write-off is the GST exclusive value. The GST of $2,300 is claimable in the BAS return.  

If the café business was not registered for GST (total sales being below $75,000) there would be no immediate tax write-off because the cost to the business is $25,300 and is more than the cost cap of $25,000.

• On 30 June 2019, the balance in the simplified tax depreciation pool was $28,500.

An immediate tax write-off of $28,500 as the balance in the simplified tax depreciation pool is less than the cost cap of $30,000.

• On 20 July 2019, Early Bird Café took delivery of a van costing $44,000 including GST funded by a bank loan.