Budget 2019: Instant asset write-off boosted to $30,000, set to save small business $700 million

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In a surprise pre-election pitch to small business, the government has proposed another boost to the instant asset write-off which would increase the threshold and give medium-sized firms access to the scheme.

Unveiled on Tuesday, Treasurer Josh Frydenberg pitched the revised program as the big SME sweetener in the 2019-20 federal budget.

The headline threshold for the instant asset write-off would increase from $25,000 to $30,000 while the eligibility criteria would be expanded from businesses with less than $10 million in annual revenue to those with less than $50 million.

Businesses will be able to claim the write-off every time an asset under the cap is purchased through to the June 30, 2020 cut-off.

This extension would make about 22,000 additional businesses eligible for the program, Frydenberg said on Tuesday night.

“Already more than 250,000 businesses have taken up the instant asset write-off, and now, even more will have the chance to do so,” Frydenberg said in his budget speech.

In opting to pitch an enhancement of the write-off, the government has again baulked at calls to make the scheme permanent, announcing no further extension past the previously announced June 30, 2020 cut-off.

In January the government announced an extension to the write-off which saw the headline threshold increase from $20,000 to $25,000, although it is yet to lock this in with legislation.

If legislated, businesses can claim assets “first used or installed ready to use” between January 29 to budget night under the $25,000 cap and then claim assets under the $30,000 cap from budget night to June 30 2020.

Medium-sized businesses would only be able to claim eligible assets from 7.30pm today until the 2020 cut-off.

The government says the $30,000 cap would save SMEs, and therefore cost taxpayers, $700 million through to 2020-21 before delivering $300 million in extra revenue over the next two financial years due to a boost in “business activity and investment”.

A further extension to the write-off will please small-business advocates, but recently there has been criticism the government isn’t doing enough to promote awareness and accessibility of the program.

Further, over the short history of the scheme, ATO data indicates small businesses claim closer to $10,000 on average under the scheme, somewhat muting benefits associated with raising the cap.

Small business Minister Michaelia Cash has previously told SmartCompany she would like to see communication of the scheme improve through the creation of a one-stop-shop web resource.

The budget contained no measures for the creation of any such resource.

Cash clarified on Wednesday morning that measures to introduce a one-stop shop measure for SMEs to access better information are underway as part of measures detailed in last year’s budget.

An announcement is expected in the coming months.

This article was updated at 4:10PM AEDT March 4.

NOW READ: Budget 2019: Cash splash for the ATO in attempt to claw back $3.6 billion in big business tax avoidance

NOW READ: Budget 2019 wrap up: Small business gets write-off increase but misses out on energy price relief


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3 years ago

No need for taxpayers to fund any special information portal for this ‘benefit’ as most SMEs (and certainly the medium sized firms newly eligible) use accountants who would be making them aware of this deduction. Also, every vehicle sales outlet, agricultural and industrial equipment business, IT equipment retailers ALL know about it and remind every customer in the hopes of making a sale or increasing the dollar amounts spent.

The primary downside for many small businesses is having the cash available to make the purchases. If they have to borrow, the interest over the life of a business loan is likely to offset (or exceed) any savings in tax in the single year the asset was purchased. When times are tough (and they are in most manufacturing, industrial and agricultural enterprises already) there is less cash to splash; people ‘make do’ with current equipment for as long as possible.

And if a small business (sole proprietor or partnership in particular) is doing well during these times and plans to invest in additional equipment to boost future turnover, they are typically better off NOT taking the immediate asset write down as they will be transitioning to higher tax brackets in future years as their income increase and this is when having the ongoing depreciation expense for the new asset will give them a bigger dollar tax break over several years rather than taking it all now in one year.

A smart business owner (heck, any clued in taxpayer) knows that ANY government always gives with one hand and taketh away with the other. So when they appear to be doing you a big favour…. look over your shoulder and hold on tightly to your wallet.

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