SMEs in the dark over $6500 instant asset write-off

Start-ups are the least likely to know about the federal government’s $6500 instant asset write-off, according to a new MYOB report, which shows almost 40% aren’t aware of the tax perk.

The small business instant asset write-off, which increased from $1000 to $6500 in the 2012 federal budget, applies to small businesses with an aggregated turnover of less than $2 million.

It means small businesses can immediately write-off assets valued at less than $6000 such as laptops, desks, etc.

MYOB commissioned independent market research firm Colmar Brunton to explore the intended use of the instant asset write-off for their business.

A total of 1005 Australian businesses were surveyed, including 966 small businesses (up to 19 employees) and 100 start-ups, which are defined by MYOB as less than two years old.

The research reveals 15% of start-ups have already used, or plan to use, the instant asset write-off to buy assets for their business this financial year.

This compares to 12% of establishing businesses (two to five years), 8% of maturing businesses (five to 10 years) and 15% of established businesses (10+ years).

However, start-ups are the least likely to be aware of the tax perk, with 38% stating: “I don’t know what the small business instant asset write-off is”.

This compares to 32% of establishing businesses, 30% of maturing businesses and 30% of established businesses.

But start-ups aren’t the only businesses failing to take advantage of the write-off.

Overall, almost one in three of the small businesses surveyed were unaware of it, while almost one in three said they would “maybe” use the write-off.

More than one in five small businesses had not used or didn’t plan to use the write-off, while less than one in five small businesses had already used or planned to use the write-off.

In light of the results, MYOB chief strategy officer John Moss is encouraging more business owners and managers to take advantage of the write-off for the sake of their businesses.

“The small business instant asset write-off for new assets, which was increased last year to $6500, can provide much-needed cashflow for many small businesses,” he said in a statement.

“If a café purchased new tables and chairs worth $6500 or less, the business can instantly write-off the full amount rather than depreciate.

“This helps to reduce their tax bill on company profits, and means more money in the bank for the business.”

The write-off can also be used to purchase technology-related items, Moss said.

“For example, the write-off can assist in the investment of equipment that improves business productivity, cashflow and team engagement, such as cloud-based IT solutions,” he said.

This article first appeared on StartupSmart.