Speaking to My Business, Tony Greco, general manager technical policy, public affairs at the Institute of Public Accountants (IPA), noted that, as it stands, time is running out for SMEs to take advantage of the lucrative $20,000 instant asset write-off.
“There’s obviously uncertainty about what the government will do – the scheduled end date is June 2018,” Mr Greco said.
He said the expansion of tax incentive to $20,000, which was introduced as a one-off and extended for another 12 months in last year’s federal budget, has been “very well received” by the SME community.
A small sample poll of 157 business owners on the My Business website over January/February backed up Mr Greco’s claims.
It found that more than half (55.8 per cent) have already used the scheme to gain an instant tax deduction. A further 8.9 per cent said their business was not eligible for the deduction, which is limited to businesses with annual turnover of less than $10 million.
In October, then Small Business Minister Michael McCormack claimed that as many as 300,000 SMEs had used the tax break.
However, unless the government makes a change in this year’s May budget, the $20,000 limit will be scrapped come 1 July.
“If they do nothing, it ends and will revert back to $1,000. We don’t accept $1,000 as an adequate number … that’s just not acceptable for a lot of small businesses trying to finance assets,” said Mr Greco.
He said the IPA has long argued for the higher deduction rate to be made permanent.
“At the end of the day, it’s just a timing difference, bringing a deduction into one year rather than across many years. Overseas jurisdictions have an even higher threshold [than $20,000].”
According to Treasury’s Tax Expenditures Statement 2017, “small business simplified depreciation rules” are expected to cost the government an estimated $1.2 billion this financial year – up from $1.02 billion in 2016-17.
Businesses seeking to have the deduction should beware of the small technicality, criticised by the Tax Institute, that while known as a $20,000 write-off, purchases must be below that level, not equal to it. In effect, that makes it a $19,999.99 write-off.