Small businesses around the country could be given another 12 months to take advantage of the federal government’s $20,000 instant asset write-off scheme that was first introduced in mid-2015.
The write-off is due to end on June 30 this year, however, small business minister Michael McCormack has called for the budget measure to be extended for at least another 12 months, saying the policy has “been excellent for small business”.
McCormack told Fairfax he has asked for the extension in submissions to Treasurer Scott Morrison, however, the move would need to be given the tick of approval by Treasury.
Speaking to SmartCompany, McCormack says he has met many small businesses that are using the tax write-off to improve their businesses.
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“From kitchen upgrades in a cafe in Forbes to offices with upgraded computers and photocopiers, new utes for tradies and almost everything in between, I have seen first-hand the benefit the $20,000 write-off can bring to business,” he says.
McCormack says he is working with Treasurer Scott Morrison to “ensure the 2017-18 budget delivers the confidence and investment Australia’s 2.1 small businesses deserve while taking a responsible approach to budget repair”.
“It is important the government considers measures which can encourage business expansion and the creation of new jobs, noting we are in a challenging budget environment,” he says.
One of the key small business policies in the 2015 federal budget, the $20,000 instant asset write-off scheme allows businesses to immediately deduct 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 is available to businesses turning over up to $2 million annually, however, the government said in last year’s budget it planned to extend eligibility for the scheme to businesses turning over up to $10 million from July 1, 2016.
This planned change is part of the government’s Ten Year Enterprise Tax Plan, which also includes proposed cuts to the corporate tax rate and still needs to be approved by both houses of parliament. A spokesperson for the Australian Taxation Office confirmed to SmartCompany the $2 million turnover threshold will remain in place until the legislation passes through parliament.
According to Treasury data released by former small business minister Kelly O’Dwyer in December 2015, more than 99,000 small businesses made claims under the write-off scheme in its first six months of operation between July and December 2015.
Small businesses claimed a total of $418.5 million under the scheme between July 1 and December 15, 2015. 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.
A possible extension of the $20,000 instant asset write-off scheme has been welcomed by CPA Australia, with chief executive Alex Malley telling SmartCompany this morning the measure not only benefits current small business owners, but also “startups, innovators and entrepreneurs”.
“If the government wants to encourage ongoing economic transformation and business growth, this is exactly the type of measure that should become a permanent feature of the tax system,” Malley says.
“In an economy with muted growth, business needs stimulus.
“The evidence shows that the small business instant asset write-off measure has been embraced by small business since its introduction.”
While the federal government’s attention will no doubt be on budget repair ahead of this year’s budget in May, Malley says this should not “derail the continuation of a good policy that is benefiting many of Australia’s two million small businesses and the overall economy.”
*This article was updated at 3.40pm on Wednesday, January 11.