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Instant asset write-off extended, threshold increased

Jotham Lian and Adam Zuchetti
Jotham Lian and Adam Zuchetti
30 January 2019 2 minute readShare
scott morrison instant asset write off extended tax threshold increased

The government has announced plans to raise the threshold for the instant asset write-off to $25,000 and extend it for another year, as it looks to entice the small business sector ahead of the federal election.

In a speech on Tuesday (29 January), Prime Minister Scott Morrison pledged to increase the small business instant asset write-off to $25,000 from $20,000.

The write-off will be available for small business with an annual turnover of less than $10 million and will be extended for another year, running until 30 June 2020. It had been due to expire at the end of the current financial year.

The government will be seeking to legislate the change when Parliament resumes on 12 February.

This measure is estimated to have a cost to revenue of $750 million over the forward estimates period, with an estimated 3 million small businesses eligible to access the write-off.

“The $25,000 instant asset write-off will improve cash flow by bringing forward tax deductions, providing a boost to small business activity and encouraging more small businesses to reinvest in their operations and replace or upgrade their assets,” Mr Morrison’s office told My Business sister publication Accountants Daily.

The government’s decision to raise the threshold comes after Labor announced that it would introduce the Australian Investment Guarantee, a permanent feature which will allow businesses to immediately deduct 20 per cent of any new eligible asset worth more than $20,000.

“This is good news for small businesses looking to purchase a new or second-hand asset, such as a vehicle, printer or generator,” the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, said following the announcement.

“The scheme allows small businesses to immediately deduct assets costing less than $25,000 instead of claiming deductions over a number of years and there is no limit on how many assets can be claimed.”

James Pearson, head of the Australian Chamber of Commerce and Industry, said the move would “further stimulate small business investment”, but reiterated calls to make the measure permanent.

“Although an extension to 2020 is not a commitment for the measure to be permanent, it is a good start.

“Making the instant asset write-off permanent will encourage longer-term investment planning by small businesses and will support continuous and sustainable business growth.”

Andrew Conway of the Institute of Public Accountants noted that increased the threshold is particularly significant, as it is the first time it has been raised above its introductory $20,000 amount. However he said the real value to SMEs would come from a much larger increase in the threshold.

“In 2018, the Australian Small Business and Family Enterprise Ombudsman’s (ASBFEO) recommended to substantially increase the current $20,000 instant asset write-off to $100,000 and we support any increase of the threshold, he said.

“When it comes to small business, cash-flow is king and ensuring this policy is instilled into the system provides some certainty.

“If small businesses can invest in their business, whether it be plant and equipment, vehicles or technology or anything else to make them more productive, that has a direct, positive impact on the economy, including the propensity to expand and employee more people.

Mr Morrison’s announcement comes amid a string of recent policies aimed at wooing SME voters, including One Nation’s policy to mandate payment terms and penalise corporates that fail to pay SME invoices on time, and Labor’s proposal to beef up laws around unfair contract terms.

Instant asset write-off extended, threshold increased
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Jotham Lian and Adam Zuchetti
Jotham Lian and Adam Zuchetti

Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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