Wasted opportunity: 47% of small businesses haven’t heard of the instant asset write-off, research finds


The Morrison government’s instant asset write-off forms a key part of its small business agenda, but new research has revealed many SMEs are unaware the program even exists.

A survey of 864 small businesses published by American Express this week shows almost half (47%) are unaware they’re able to write off a purchased asset worth $20,000 or less in their tax return for that financial year.

Further, only 52% of the businesses surveyed that are aware of the scheme say they’ve actually claimed the deduction.

The figures have given voice to the concern that despite lobbying to make the instant asset write-off permanent many aren’t using it to its full potential.

Accountant and Healthy Business Finance owner, Stacey Price, says many business owners misunderstand what the instant asset write off actually is.

“It’s the terminology people aren’t aware off, they think it’s something on top of the assets they’re already buying,” she tells SmartCompany.

Price says a lack of understanding, especially for those businesses without close relationships with their accountants, was preventing widespread adoption of the scheme.

“People think it’s just extra money back, rather than having to spend money,” Price explains.

“We have a lot of people asking how they can get their $20,000 back, we have to explain it’s not just free money.”

The current instant asset write-off scheme allows businesses with less than $10 million in turnover to write-off a purchased asset worth less than $20,000 in their tax return for that year.

According to ATO data, almost 350,000 businesses made a claim under the program in 2016-17, but the average amount claimed sits at about $11,000.

Putting those figures into perspective, Australian Small Business and Family Enterprise Ombudsman data published earlier this year found there were 1.98 million Australian businesses with turnover less than $2 million a year in 2014-15.

At Senate estimates earlier this month it was revealed consideration has been given to a possible expansion of the instant-asset write-off program, either by increasing the number of companies with access to the scheme or increasing the asset threshold.

Jobs and small business department representatives confirmed informal discussions about an expansion of the instant asset write-off program have taken place.

But Price says the government should invest more in the communication of the existing scheme.

“If people could understand it a bit more it may be that they would buy that big asset,” she says.

Price says many business owners are purchasing things like laptops, desks and other equipment and are thus not using the full value of the scheme.

Grants too complex, not advertised well

The American Express report also revealed just 8% of businesses surveyed have accessed government resources, grants or training during the past year.

While the government has created a myriad of programs for up-and-coming and established businesses to access initiatives, small business owners complain the system is complex and poorly advertised.

Derek Sheen, the founder of retail business Yellow Octopus, says he’s had a look for available grants, finding most weren’t applicable for retail businesses.

“There may be some grants out there with are applicable to us, but they don’t seem to be well advertised,” he tells SmartCompany.

Leonie Barakat of Itty Bitty Accessories in Victoria was quoted in the report expressing similar frustration.

“[Government should] recommend grants for certain parts of the operation or certain parts of the business instead of making it such a process that you actually have to go searching through hundreds and thousands of different grants online,” she said.

The survey found the minority applying for grants were interested in help with buying equipment (23%), improving health and safety (29%) and employing and training staff (28%).

Areas where businesses said they wanted more government assistance included pursuing growth (50%), marketing and sales (38%) and buying equipment (37%).

Price says there are lots of restrictions on government grants, and this creates confusion among business owners about who they’ve been designed for.

“Sometimes it’s a 20-page application form and startups don’t have a lot of information to fill out that form,” she says.

Price also points out many grants require businesses to have a turnover of $500,000 or $1 million, which excludes many.

“A startup in their first two years may not be reaching $500,000 in turnover … a lot of SME owners feel that if they were earning $500,000 to $1 million they wouldn’t need a grant.”

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

NOW READ: Six government grants for businesses that you might not know about


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3 years ago

Instant Write-off does not work well for all businesses, especially small start-up sole traders. Consider they spend say $15,000 for asset purchases, and make a profit of $20,000 before claiming the write-off. They deduct the full $15,000. Their taxable income is $5,000. (the tax free threshold is $18,200) Whereas if they depreciate the “old way” they are left with a tax deduction of say $3,000 for depreciation, taxable income of $17,000 still NO tax to pay, but here they ALSO have $12,000 of future depreciation available to them. You also lose the ability to write-off individual assets and claim any residual on them specifically. There are a host of businesses who do benefit, but some don’t.

3 years ago

Agreed, BetsyNT. Also if a business expects their income / profit to GROW a lot over the next several years then the Instant Asset Write-Off is much less attractive. They may be better off and save more in taxes over the life of the asset if they write it off slowly to maximise deductions in future years when they may be in higher tax brackets. This argument however is negated IF the new expensive asset will also help them boost sales more than loss in write-off in future years. Best to discuss purchases with your accountant to ensure the business gets the best deal, especially if a sole trader or partnership as the business IS you. If it is a non-performing asset (say a newer vehicle) that won’t boost sales directly then just because you can write it off quickly doesn’t make it a good business decision – the money may be better spent elsewhere,

Leanne Berry
Leanne Berry
3 years ago

More and more business owners need to be engaging with professional bookkeepers and advisors who have access to current training and support on legislative changes and updates from their professional bodies such as the Institute of Certified Bookkeepers (ICB). From simple to complex business and financial management issues we are well placed to support business in Australia.

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