Budget 2016: Government considers extending $20,000 asset write-off scheme and plans to phase in company tax cuts

Treasurer Scott Morrison

The federal government is reportedly considering extending the $20,000 instant asset write-off scheme for small businesses that was introduced in last year’s budget.

The scheme is accessible to businesses turning over less than $2 million annually and allows them to immediately claim depreciation on every asset they purchase valued up to $20,000 instead of claiming the deductions over a number of years.

The tax break is due to finish at the end of June 2017.

However, Fairfax reports extending the scheme is “in prospect” to be included in the 2016 federal budget, which will be handed down tomorrow evening.

It is not clear if the extension would apply to the timeframe during which businesses can access the accelerated depreciation measures, the value of the assets being depreciated or the turnover threshold for eligibility.

According to Treasury data released by Small Business Minister Kelly O’Dwyer in December 2015, more than 99,000 small businesses had made claims under the write-off scheme since July 2015.

Small businesses claimed a total of $418.5 million under the scheme between July 1 and December 15. This compared to a total of $250 million claimed against the instant asset write-off scheme by 78,000 small businesses at the same time the year before when the depreciation limit was much lower at $1000.

The scheme was originally forecast to cost the government $1650 million over the 2017 and 2018 financial years, however, the government’s Tax Expenditure Statement revealed in February the scheme is expected to now cost $2020 million over the same period.

Peter Strong, chief executive of the Council of Small Business of Australia, told SmartCompany this morning it wouldn’t surprise him if the government did extend the scheme past 2017 as it has been a “successful process”.

However, Strong is also hoping to see the government increase the turnover threshold for eligibility for the scheme to $5 million.

“One of the few negative things to come out of last year’s budget was there were businesses saying ‘I’d love to do that but I’m out of the turnover threshold’,” he says.

“It would make a big difference.”

Plans to phase in cuts to company tax rate

Meanwhile, Treasurer Scott Morrison has all but confirmed the government will move to cut the corporate tax rate, although the cuts will be phased in over a period of time.

According to Fairfax, the government’s motivation for reducing the corporate tax rate is to encourage new investment. If the government proceeds with the cut, it will be the first reduction in the company tax rate in 15 years.

The 2015 federal budget included a 1.5% tax cut for incorporated small businesses turning over $2 million or less a year, along with a $1000 tax deduction for unincorporated small businesses.

Additional cuts to the corporate tax rate are expected to be phased in over a number of years.

“The budget needs to provide impetus in non-mining investment to generate new sources of growth after the mining boom,” Morrison said.

COSBOA’s Peter Strong says he would welcome a reduction in the rate of company tax but says any corporate tax cut must go hand-in-hand with measures to ensure big businesses do not continue to dodge their tax bills altogether.

“Some of them couldn’t give a damn, even if the government lowered the tax rate,” he says.

“Those processes have got to be in place.”

SmartCompany contacted Small Business Minister Kelly O’Dwyer for comment but did not receive a response prior to publication.

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