As part of the release of its policy costings, the federal opposition has unveiled how it plans to make the instant asset write-off for SMEs permanent, and give all businesses other tax incentives.
As part of its Australian Investment Guarantee proposal, a Labor government would retain the $30,000 instant asset write-off for SMEs, introduced as part of the government’s federal budget in April and passed by the federal parliament days later.
It would also support the current plans to lower the company tax rate to 25 per cent for all businesses with turnover of less than $50 million.
But a new measure would enable all Australian businesses, regardless of size, to “immediately deduct 20 per cent of any new eligible asset worth more than $20,000”.
The balance would be depreciated in line with existing frameworks.
Those assets deemed eligible for the upfront deduction include tangible machinery and equipment, whether they be upgrades or new purchases, as well as depreciable intangible assets such as patents and copyrights.
Buildings and passenger motor vehicles would not be eligible.
In its costing, released on Friday (10 May), Labor said that all of the measures under its Australian Investment Guarantee would be permanent, as a means of providing certainty for the country’s businesses.
“Labor’s Australian Investment Guarantee is permanent — that means businesses can continue to take advantage of the immediate tax deductibility whenever they make a new investment in an eligible asset,” it said.
“The McKell Institute estimates the AIG could create 77,000 jobs and increase wages by up to $1,500 for an average wage earner.”
Speaking on the instant asset write-off, RSM Australia’s senior manager of tax services, Tracey Dunn, said that being a permanent fixture would be beneficial to the SME community.
“The Labor Party has indicated previously it would make this measure permanent,” she said.
“Instant asset write-offs are welcome, but also add to confusion for taxpayers looking to purchase business assets.
“Small businesses would be more likely to benefit from this measure if it were made a permanent part of tax legislation, reducing complexity and letting small businesses bring forward the purchase of business assets when the business is ready to grow.”
Labor said “the Australian Investment Guarantee will cost around $3.3 billion over the forward estimates”, which it would fund “by making multinationals pay their fair share and closing tax loopholes used by the top end of town”.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.