Budget 2023: $290 million instant asset write-off scheme extension promises $20,000 threshold for small businesses

The instant asset write-off threshold will temporarily rise to $20,000, federal budget papers reveal, giving small businesses another chance to invest in their operations and immediately deduct the full cost of depreciable expenses from their tax bill.

Small businesses with an annual turnover under $10 million will be free to deduct the full cost of business upgrades and resources costing less than $20,000, so long as those purchases are installed and ready for use between July 1, 2023, and June 30, 2024.

The measure will improve cash flow for small business while lowering the compliance and accounting costs of managing depreciation over several years, the budget papers state.

The $20,000 threshold will operate on a per-asset basis, the budget papers add, meaning “small businesses can instantly write off multiple assets.”

The extension is projected to lower tax receipts by $290 million over the five years from 2022–23.

The scheme was slated to continue in a diminished form from July 1 2023, offering full expensing for purchases under $1,000.

Its continuation as a five-figure policy comes as something of a surprise, as the federal government had given little indication it would continue tax measures specifically designed to encourage general small business expenditure in a high-inflation environment.

Temporary full expensing, a turbocharged version of the instant asset write-off scheme introduced in October 2020, was slated to expire on 30 June 2023, with its demise widely seen as the end of pandemic-era tax breaks designed to foster spending.

The year-long instant asset write-off extension will likely be welcomed by small business groups, although the $20,000 threshold undershoots what some industry advocates had called for.

Business NSW and the Australian Chamber of Commerce and Industry had called to retain temporary full expensing until at least June 2025.

“Failure to renew would damage SME investment at a time they need support, and the economy will be experiencing the full impact of monetary policy tightening,” Business NSW said in its pre-budget submission.

The Council of Small Business Organisations Australia urged an instant write-off extension for assets valued under $100,000.

The Institute of Public Accountants went further, calling for it to become a permanent part of Australia’s tax landscape.

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