Nearly 300,000 SMEs took advantage of the $20,000 write-off in 2015-16, but the average amount claimed is less than half

Michael McCormack

Small Business Minister Michael McCormack.

Nearly 300,000 Australian small businesses took advantage of the federal government’s instant asset write-off scheme in the 2015-16 financial year, with tax professionals saying the scheme has given “huge benefits” to SMEs in more ways than one.

Small Business Minister Michael McCormack said in a statement on Friday that approximately 14% of Australia’s 2.1 million SMEs took advantage of the $20,000 tax break, with the number of claims increasing by 50,550 from the previous financial year.

“The instant asset write-off is directly helping small business bottom lines and improving cash flow for small business, which means more investment in local communities, higher wages and more local job opportunities,” McCormack said.

The average amount claimed by SMEs increased from $4065 to $9000 in the 2016-15 financial year, a number that principal tax consultant at Perigee Advisers Lisa Greig shows SMEs aren’t trying to “work the system”.

“I’m really pleased with the average amount being around $9000. If it was up around $18,000 to $19,000 it would show that business owners were trying to work the system,” Greig told SmartCompany.

“Buying something just for the tax incentive is not the right way to do business, and it’s not the right thing for a business. The average being around $9000 proves that this is working.”

Greig believes the government’s $20,000 tax scheme, first introduced in the 2015 budget, is doing wonders for many business owners across the country, especially when it comes to purchasing decisions.

“It’s making the buying decisions a lot easier, and we’re not seeing people buying things for the sake of it. Business owners are taking the deductions this year rather than spanning it over the next five,” she says.

“SMEs are also using it to ‘feature creep’, choosing slightly more expensive equipment with better features because they know they can claim this write-off.”

Tax agents passing quality of life savings onto SMEs

Quality of life for tax accountants has also increased due to the scheme says Greig, which she believes results in more savings passed down the line to SME owners.

“It’s made it so easy for tax accountants because we don’t need to do depreciations, and tax returns become less complex, so we pass down our fee reduction associated with that,” she says.

McCormack describes the scheme as a “shot in the arm” for Australian small business owners, sayingthe write-off means “tradies can invest in better tools, cafes and restaurants can upgrade their equipment and all small businesses can reinvest to grow their business”.

“These great results are set to continue with tens of thousands more small businesses able to access the instant asset write-off thanks to the government’s increase in the small business turnover threshold to $10 million per year,” he says.

In this year’s budget, the $20,000 scheme was extended a further 12 months, and SMEs have until July 2018 to take advantage of the write-off. However, Greig believes there’s little reason why the government wouldn’t keep the scheme going come the 2018 budget.

“I can’t see any reason why they wouldn’t keep it going, it’s a nice incentive and it’s not getting rorted,” she says.

“It’s working well from an asset purchase point of view, and us tax agents love it.”

For SME owners unclear on what they can and can’t claim through the $20,000 instant asset write-off, Greig recommends they have a conversation with their tax agent.

“When the scheme was announced everyone got it a bit wrong — a lot of people thought they just got $20,000 back — but everyone’s on the same page now,” she says.

SmartCompany contacted the Australian Taxation Office but no further details were available about how small businesses are using the write-off scheme.

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