Finance

The push is on to make $20,000 instant asset write-off scheme permanent for small businesses

Emma Koehn /

Small business groups are pushing hard for the government’s $20,000 instant asset write-off scheme to become a permanent fixture in the May budget, but while everyone seems to agree the policy makes sense, the government is yet to commit to extending the popular scheme beyond June 30.

The policy was introduced in the 2015 federal budget, encouraging small businesses to spend more on equipment by giving them the ability to claim accelerated depreciation on the full value of income-producing assets purchased to the value of $20,000, instead of claiming the deductions over a number of years. Prior to the introduction of the measure, the instant asset write-off threshold for small businesses was $1000.

The scheme was originally available to businesses turning over up to $2 million annually, however, eligibility for the scheme was later extended to businesses turning over up to $10 million after the government’s definition of a small business was changed.

The policy was warmly welcomed by smaller operators, and the SME community successfully lobbied for an extension of the policy, which meant it would stay in place until June 30, 2018 — 12 months longer than its original expiration date of June 30, 2017.

As budget time approaches once again, business groups including the Council of Small Business Australia (COSBOA) and Australian Chamber of Commerce and Industry, are using their pre-budget submissions to push for the scheme to continue on, potentially in perpetuity.

“This is an important policy to all small businesses and we believe it must continue going forward,” COSBOA says in its submission, while also suggesting the government could do more to make sure all industries are aware of the benefits of the policy.

Speaking to SmartCompany, COSBOA chief executive Peter Strong finds it challenging that every year, his community has to argue for a policy that has widespread appeal.

The impression I get is the idea that if they give it to us permanently, then we’ll just start asking for something else. The issue here though is the uncertainty [of whether the scheme will continue].”

In its pre-budget submission, the Australian Chamber argues for an extension of the policy as a way of lifting investment and innovation across the country.

When contacted by SmartCompany this morning, the treasurer’s office would not be drawn on whether the government is actively considering extending the scheme, instead highlighting previous comments from Treasurer Scott Morrison about the policy, which were made at the national accounts press conference this week.

Morrison said the scheme had achieved the “desired effect”, and “I like doing things that have the desired effect”.

According to Treasury data, in the first year of the scheme, 99,000 businesses took advantage of the write-offs, claiming a total of $415 million, up from the $165 million claimed in write-downs before the scheme was introduced.

In October 2017, then Small Business Minister Michael McCormack said the most recent Treasury data revealed another 50,500 businesses took up the scheme in its second year, with the average amount claimed increasing from $4000 to $9000.

Labor looks local with $20,000+ write-off scheme

The push for an extension of the instant asset write-off scheme comes as at the same time as the announcement of a new write-off scheme by the federal opposition. If elected, the Labor Party wants to allow businesses that buy local machinery and plant equipment, or intangible items like copyright, that are worth $20,000 or more to claim an immediate 20% write-off on the value of the asset.

A spokesperson for shadow treasurer Chris Bowen told SmartCompany this morning this scheme is designed “to provide tax relief for businesses who invest in Australia”.

When asked about Labor’s stance on extending the government’s existing instant asset write-off scheme, the spokesperson said Labor has previously supported the policy each time the government had moved to extend it.

Strong says tax policies like write-off schemes are important to smaller operators, because people actually use them and in general, it tends to be easy to understand how they apply to your business.

It’s a practical, real thing — something that we use, something that people like accountants can easily give advice on, and it’s pretty simple as well,” he says. 

NOW READ: ATO warns small businesses it will come knocking in 2018, after netting $1.8 million from random Melbourne audits

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Emma Koehn

Emma Koehn is a former senior SmartCompany journalist.

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