SMEs celebrate proposed $30,000 instant asset write-off increase — but many still don’t know how it works

Australian small-business owners are celebrating the government’s proposed boost to the popular instant asset write-off scheme in last night’s federal budget, claiming it will allow them to invest further in their businesses.

The amount SMEs can claim through the tax scheme was increased an extra $5,000 in budget measures last night, boosting the threshold to $30,000 from $25,000, which the government increased the write-off to in an announcement in January.

Additionally, larger businesses will be granted access to the tax break, with businesses posting revenues of $50 million or less given access, an increase from the previous limit of $10 million or less. The Treasurer has said this will provide access to an additional 22,000 businesses.

One such business set to take advantage of the increase if it is legislated is Smart50 finalist Coastal Transport Services. The business recently tipped over the $10 million revenue threshold, which would have rendered it ineligible for the write-off.

“This is definitely a boon for the business, but I don’t know if I’ll be rushing out to buy a dozen things worth $30,000 or less,” founder Ray Graetz told SmartCompany.

“I might replace some computers soon, or some printers, but it’s a bit more difficult with motor vehicles as they usually tip over the $30,000 mark.”

Similarly, co-founder of Tentworld Jon Burrell told SmartCompany his business would now be eligible for the write-off if the $50 million revenue threshold was enacted, saying his business hadn’t used the scheme but would plan to now.

“If we do end up being under $50 million in revenue for next year, it’ll definitely be a nice benefit and will definitely speed up the ROI of any new capital purchases we make — making new capital purchases easier & more appealing to do,” he said.

“We do have a fair shopping list of equipment we’d like to buy to make the shops more efficient and add some excitement so we’ll definitely be taking advantage of this.”

Small business ombudsman Kate Carnell and Coastal Transport Services founder and Top Regional winner Ray Graetz.

The $20,000 instant asset write-off allows businesses to write off the depreciation on work-related asset purchases instantly, rather than claiming smaller depreciations each year.

Small business Ombudsman Kate Carnell said she was pleased to see the write-off increased and expanded, but “had hoped the threshold was higher to capture capital intensive businesses, such as primary producers”.

Scheme still lacks awareness

While the scheme has proved popular with small-business owners since it was introduced in 2015, there’s also a significant chunk of business owners who are unaware of the scheme, with a survey last year finding nearly 50% of SME owners did not know about it.

A number of business owners contacted by SmartCompany this morning told the publication they were unaware of the scheme.

Speaking to SmartCompany last year, Small Business Minister Michaelia Cash said she supported using “any mediums” to help SMEs improve their awareness of the scheme, but ultimately said it was up to accountants to inform their clients.

Cash said at the time she supported the creation of a “one-stop shop” to help small business better understand government policy, however, the budget did not include any provisions to make this resource a reality.

“The increase of this initiative will further improve cashflow for hardworking Australian small-business owners 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,” Cash said in a statement following the federal budget.

Not for the everyman

Business owners, including regular SmartCompany finance commentator and small-business owner Stacey Price, claimed the write-off didn’t support businesses on the smaller side of town and with few assets to deduct, calling on the government to “actually help the little guy”.

What do micro business owners get out of the budget?
And don’t say the instant asset write off.
I have been in business for six years and never benefited from that.
Give me something that actually helps the little guy.#budget2019 #accountant#federalbudget

— Stacey Price (@loveyournumbers) April 2, 2019

Price told SmartCompany she feels like she’s the “only person who doesn’t love it”, but things business owners can get caught up in thinking they’re going to have $30,000 written off their tax bill.

“I have a bit of a love-hate relationship with it, as a lot of SMEs don’t know it how it works,” she says.

“Also, a lot of micro-businesses don’t have $30,000 to spend in the first place, so they go out and borrow $30,000 to buy thing they don’t need, which won’t necessarily reduce their tax.”

Price says she’d prefer to see initiatives from the government to aid new business owners, like a financial incentive or rebate for people undertaking training courses on how to run a business.

“I’d love for there to be an incentive for starting a business, because usually there’s just a disincentive,” she says.

The government has also refuted pushes by small-business advocates to make the popular scheme permanent, again indicating the write-off will be up for review in June 2020.

The legislation to both increase the threshold and expand the scheme to larger businesses is also yet to be put to parliament, and with few sitting days remaining before the election in May, the Morrison government may be hard-pressed to find the time to pass it.

However, the scheme has support from Labor, with Shadow Treasurer Chris Bowen indicating the opposition will support the changes, so business owners are unlikely to see it axed.

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