The Instant Asset Write-off offers a valuable opportunity for small businesses to invest in their own productivity – yet as many as three in four small enterprises could be missing out.
Talk to any small business owner, and chances are their eyes light up at the prospect of tax savings.
And why not? Exploring ways to trim a business tax bill makes a lot of sense.
“Only 1 in 4 small business say they are taking advantage of the Instant Asset Write-Off”
So, we were surprised to see from our own OnDeck research that only one in four (26%) small businesses nationally say they are taking advantage of the Australian Governments $20,000 Instant Asset Write-Off (IAWO).
This is an area that can open opportunities to brokers.
What is the IAWO?
As a quick explainer, the IAWO allows businesses with a total turnover below $10 million to claim an immediate tax deduction for individual assets priced up to $20,000[1] rather than depreciating the assets over their useful life.
The assets don’t have to be new. They can be pre-loved or second-hand, and you can claim multiple assets.
The golden rule is that the asset(s) must be in place and ready to go by 30 June 2025 to claim the IAWO.
Small businesses rely on their accountant for tax advice
Despite the immediate tax saving and cashflow benefits, over one in three (36%) small businesses admit they are not making the most of the IAWO.
“38% don’t know about the IAWO, often leaving it up to their accountants to handle”
Two in five (38%) simply don’t know about the IAWO, often leaving it up to their accountants to handle, with 32% specifically relying on their accountant’s advice about what deduction they can claim.
Despite the relatively low uptake of the IAWO, the same OnDeck research revealed that the vast majority (76%) of small businesses are confident about the business deductions they can claim.
Similarly, 84% of small businesses say they are up to date with their tax planning and obligations. This scores a big tick.
“… small businesses should be having conversations with their accountant… and brokers about opportunities to utilise the IAWO.”
Even so, it’s that time of year when small businesses should be having conversations with their accountant about final tax planning for the 2024-25 financial year – and with their brokers about opportunities to utilise the IAWO.
It’s definitely worth raising the issue of the IAWO with your small business customers.
OnDeck clients tap into the IAWO
At OnDeck, around one in five of our loan applications are typically for business equipment.
At this time of year, that jumps to about two in five applications as small businesses take advantage of the IAWO, with OnDeck offering fast access to business loans from $10,000 to help them capitalise on the opportunity.
“At this time of year about two in five applications are for business equipment as small business take advantage of the IAWO.”
So clearly, plenty of small enterprises are on the front foot when it comes to making the most of this valuable tax saving. But many may rely on the help of their broker to organise fast, efficient funding.
Cameron Poolman, CEO of OnDeck Australia, says, “With only weeks remaining in the current financial year, there is still time for eligible businesses to make a strategic purchase and reduce their taxable income by taking advantage of the IAWO.”
He adds, “This important tax break gives small businesses an immediate reward for investing in assets that can boost productivity – like vehicles, machinery, tools, and office equipment.
“It can also help businesses expand into new products or services, or enhance their customer experience and workplace appeal through renovations or fit-outs.
“That makes the IAWO an important issue for brokers to discuss with their small business clients.”
Even better, as the IAWO drives a reduction in the company’s annual tax bill, it can also free up funds for investment in other areas of the business such as marketing, research, or staff development.
Some purchases can’t be claimed
Of course, small businesses should always speak with their tax professional before claiming a deduction for big ticket buys.
Some purchases simply won’t pass muster with the Australian Taxation Office (ATO).
As a guide, the ATO says some of the most outrageous deduction attempts it saw last year include[2]:
- A mechanic trying to claim an air fryer, microwave, 2 vacuum cleaners, a TV, gaming console and gaming accessories as work-related. The claim was denied as these expenses are personal in nature.
- A truck driver, who tried to claim swimwear because it was hot where they stopped in transit and they wanted to go for a swim. Again, the claim didn’t pass muster as swimming cossies are personal in nature.
Accounting body CA ANZ[3] reports a trend of big-ticket luxury purchases being passed off as business expenses.
It cites the example of one taxpayer who tried to claim a family trip to a tropical island, saying it was related to their earthmoving business.
Another claimed a luxury yacht as a work expense – because they might have some business to do on the islands.
“Our tax laws are complex, and it’s easy to make mistakes. Yet penalties can (and do) apply for getting it wrong.”
While these examples sound dodgy from the get-go, our tax laws are complex, and it’s easy to make mistakes. Yet penalties can (and do) apply for getting it wrong.
Play it safe. Encourage your small business customers to speak with their accountant.
Act fast to secure funding sooner
Access to commercial finance can be the thing that allows small businesses to take advantage of the IAWO.
Previous OnDeck research shows one in five (18.3%) small business owners would use additional funding to upgrade equipment or facilities.
But there’s no time to waste.
“With only weeks to go before 30 June, I encourage brokers to reach out to their small business clients to discuss whether they would benefit from funding to access the IAWO in the current financial year,” said Cameron.
Talk to OnDeck today
For business owners – and their brokers – looking to take advantage of the IAWO, OnDeck’s Lightning Loans from $10,000 can provide fast funding that make it possible to purchase eligible assets in time for the EOFY deadline.
“We are all about empowering brokers and their small business customers to act fast, secure the funding they need to invest in their company, and make the most of a valuable tax saving before 30 June,” Cameron notes.
For fast funding to help your small business clients achieve their goals, talk to OnDeck direct by calling us on 1800 676 652 or visit www.ondeck.com.au, and find out how our turbo-charged finance can help build your broking business while helping your small business clients boost productivity and pocket valuable savings on tax in the process.
* Important information: OnDeck does not provide tax, legal, or accounting advice. Any references to tax obligations or financial matters are for general information only and should not be relied upon. We recommend speaking with a qualified tax professional or financial advisor for guidance specific to your situation.
Sources
[1] https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/depreciation-and-capital-expenses-and-allowances/simpler-depreciation-for-small-business/instant-asset-write-off
[2] https://www.ato.gov.au/media-centre/ato-unveils-wild-tax-deduction-attempts-and-priorities-for-2025
[3] https://www.charteredaccountantsanz.com/news-and-analysis/media-centre/press-releases/a-luxury-yacht-a-tropical-island-trip-and-hair-cuts-tax-specialists-reveal-the-cheekiest-claims
