06 Feb Tax Deductions
Government to extend instant asset write-off, rebuffing calls to make it permanent
Tuesday, January 29, 2019/
After months of cabinet consideration, Prime Minister Scott Morrison today announced the $20,000 write-off will run through to June 30, 2020, instead of 2019.
The scheme, which allows businesses with less than $10 million in turnover to write-off a purchased asset worth less than $20,000 in their tax return for that year, will also be extended to cover assets up to $25,000.
“Businesses can go out and invest today, whether it’s a vehicle, a piece of plant or equipment, all of it, up to $25,000, immediate write-down,” Morrison said in his first economic speech of 2019 today.
It is the second time the government has opted to extend the scheme rather than making it permanent, while there was also no mention of increasing awareness of accessibility of the scheme in Monday’s announcement.
Small Business Minister Michaelia Cash told SmartCompany last year she supported improving awareness and accessibility after evidence surfaced that many small businesses haven’t made a claim under the program since its inception.
According to ATO data, fewer than 350,000 businesses claimed something under the program in 2016-17, while American Express survey data from last year indicated 47% of SMEs haven’t heard about it.
The average amount claimed was just $11,000 in 2016-17, according to the ATO.
Accounting professionals have previously complained that small business owners aren’t across the details of the program or how to properly utilise it, while the Council of Small Business Australia (COSBOA) and Australian Chamber of Commerce and Industry have been campaigning to make the write-off permanent for almost a year.
Australian small business and family enterprise ombudsman Kate Carnell is pleased the limit has been increased but says awareness remains an issue for the scheme.
“Many small businesses don’t know about the instant asset write-off and I think it’s really important the government, through possibly the ATO, let’s small businesses and their accountants know what’s happened,” she tells SmartCompany.
“When I’ve been out on the road talking to small businesses it’s amazing how many of them don’t have any idea and don’t know what it can be used for.”
COSBOA chief executive Peter Strong told SmartCompany on Tuesday he welcomed the announcement but said it would have been nice if it was made permanent.
“It would be nice if [the amount] was more and [it was implemented for] longer, but it’s an increase of 25%, you can’t sneeze at that,” he says.
Strong says the government hasn’t made the scheme permanent because it’s concerned about the effect on the budget bottom line.
“In the long run, we’ve got to review the whole scheme and the way it works, there’s an appetite from the government, from Michaelia Cash, to make that happen.”
Contrasting the Coalition’s policy, Labor has its own investment guarantee, which is permanent and allows all businesses to deduct 20% of a new eligible asset worth more than $20,000.
Both the Coalition and Labor are seeking to make small business a key battleground in the lead up to the next election, with both parties unveiling a suite of related policies in the last six months.
The Coalition has focused on tax cuts, access to finance and the instant asset write-off as its key selling points, while Labor has recently announced a better playing field for government contracts and a crackdown on unfair contract terms.
Legislative change will be required to extend the write-off, which the Coalition will pursue when Parliament resumes in February.
Morrison said the legislation will be a “high priority” for the government.