Increasing the instant asset write-off
The proposed budget will expand the instant asset write-off for SMEs from the current threshold of $25,000 to $30,000 through 30 June 2020. Since the threshold applies on a per asset basis, eligible businesses can instantly write off several business assets. After coming into effect in 2015 – with an original threshold of $20,000 – more than 350,000 businesses have taken advantage of the instant asset write-off.
In addition to raising the per-asset threshold, the government announced it will raise the annual company threshold for eligibility from $10 million to $50 million turnover in a financial year. As a result, around 22,000 additional businesses, employing around 1.7 million people, will be able to access the instant asset write-off. If you haven’t used the instant asset write-off before, this handy guide should tell you all you need to know.
Small and medium businesses will benefit from the changes and boost their cash flow by immediately deducting purchases of eligible assets that cost less than $30,000. The increased threshold amount and eligibility apply from 7.30pm (AEDT) on 2 April 2019 to 30 June 2020.
Moula CEO Aris Allegos voiced his support for the changes.
“Increasing the instant asset write-off to $30,000 is good news, but research shows that up to two-thirds of SMEs haven’t taken advantage of the scheme so far,” he said. “The write-off gets headlines, but ultimately relies on small businesses being able to access funding to purchase these assets.”
Since the instant asset write-off was initiated in May 2015, Moula has enabled a broad range of small businesses to get the funding needed to purchase assets and take advantage of the tax benefits.
Note: The instant asset write-off maximum amount per asset was increased to $150,000 in March 2020. The program was originally until 30 June 2020 but was extended until 30 December 2020.
Lowering the small business tax rate
Another benefit announced in the budget is lowering company tax rates for small and medium-sized companies with turnovers below $50 million. SMEs currently facing a 27.5% tax rate will have a 25% rate by 2021–2022. In the new budget, the timeframe for this change has been brought forward five years. Accelerating these tax cuts will benefit approximately 970,000 businesses that employ around 5.2 million people.
Comparing the two changes announced by the government, Allegos said, “Reducing the tax rate is a more material outcome for SMEs because it gives businesses additional money to grow.”
Improving access to finance
In addition to changes to company tax rates and the asset write-off threshold, the Coalition reaffirmed its commitment to establishing the $2 billion Australian Business Securitisation Fund. The aim of the fund is to enhance access to finance for small businesses. Learn more about it in Australian Government’s $2 Billion Lending Boost – What Does It Mean for Small Business?