SMEs were pleasantly surprised to learn the $20,000 instant deduction would be extended for another year, but the ongoing 12-month extensions are doing nothing to deliver financial certainty.
In the lead up to the budget, former ATO director and current head of tax communications at H&R Block, Mark Chapman, told My Business that the $20,000 instant asset write-off would end as planned on 1 July this year, but that a watered down version could be made permanent.
Such a move, he suggested, would bring more stability and certainty to the business expenses outlook.
“I don’t expect that they will extend it again,” he had predicted.
“Having said that, I think given that there is a general election not too far off and that the government hasn’t had a particularly smooth period with small business recently, I suspect they will look to do something to replace that.”
However Treasurer Scott Morrison announced yet another 12-month extension to existing scheme, which was already extended by the same length of time in last year’s budget.
“For small business we will once again extend the instant asset write off for businesses with a turnover up to $10 million for purchases of up to $20,000,” Mr Morrison told the parliament.
Mr Chapman was pleased smaller businesses will continue to benefit from the arrangement, despite being proven wrong on his forecast.
“The threshold amount was due to return to $1,000 on 1 July 2018. As a result of this announcement, [SMEs] will be able to immediately deduct purchases of eligible depreciating assets costing less than $20,000 that are acquired between 1 July 2017 and 30 June 2019 and first used or installed ready for use by 30 June 2019 for a taxable purpose,” he said.
“Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the general small business pool (the pool) and depreciated at 15 per cent in the first income year and 30 per cent each income year thereafter. The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools).”
However he had hoped the government would make its replacement measure more permanent, in order to bring more certainty to business operators.
Not everyone has been convinced of the effectiveness of the deduction in supporting SME growth though. Sequel CFO’s David Boyar previously labelled the measure as “very overrated” and nothing more than “a gadget benefit”.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.