After chopping and changing the rules in recent years to get businesses spending, the Federal Government is being pushed to set a big tax write-off scheme in stone – and to increase the cap to help those struggling.
Small businesses in need of a new workhorse ute would be among those to benefit if proposals to make a major tax write-off scheme a permanent deal go ahead.
Shadow Minister for Small Business Sussan Ley has called for the instant asset write-off scheme to be permanent and the cap to be raised to $30,000, saying the Opposition would do so if successful in the 2025 federal election.
“You don’t need me to tell you that the road ahead for Australian small and family businesses is a rocky one,” said Minister Ley at a recent conference for accounting organisation CPA Australia.
“The Governor of the Reserve Bank talks about the ‘narrow path’. I think she is right and it’s a reminder that while Australian small businesses are not driving off a cliff, they are most certainly driving along a dangerous cliff edge.”
The call is backed by CPA Australia, which says it is “encouraged” by move.
MORE: ‘Far less generous’: How the new instant asset write-off affects cars
“We believe this measure will provide small businesses with much-needed certainty to plan for the future,” said CPA Australia’s Tax Lead, Jenny Wong.
“The delay in passing the bill has already caused small businesses to lose out on opportunities for the 2024 financial year. Small businesses need certainty for their investment decisions, and we support the increase to the threshold to $30,000 and making the instant asset write-off permanent.”
The instant asset write-off scheme allows eligible businesses to claim an immediate deduction for the business portion of the cost of an asset (such as a vehicle) in the year it is first used or delivered ready for use.
The rules have chopped and changed a lot in recent years, though currently the total amount that an asset can cost is $20,000 – and that is only available to businesses earning less than $10 million a year – though the deduction is immediate rather than writing the cost off over a number of years.
MORE: Federal Budget 2024: The car tax changes you need to know about
This is not much to buy a car with given there aren’t really any new vehicles available for under $20,000 these days – but it does also apply to used vehicles, and can be beneficial for fleets.
As part of the 2024–25 Budget, the Federal Government announced it would be extending the existing instant asset write-off for another 12 months.
Until 2019, the amount was capped at $20,000 but it was increased to $25,000 during 2019, and then $30,000 in 2020 in response to the beginning of the COVID-19 pandemic.
But the big break for small businesses came in 2020/21 when the then government jacked it up to $150,000 for utes and vans – and $60,000 for passenger cars – to encourage spending.
During that time, the previous government expanded the definition to allow businesses earning up to $500 million from $50 million, and introduced Temporary Full Expensing (TFE), which was essentially the same but applied to companies earning up to $5 billion and with no limit on the purchase price of a new asset.
The current administration ended the TFE from 30 June 2023, and says expanding the instant asset write-off scheme could drive further unwanted inflation.
According to a report by Smart Company, Minister for Small Business, Julie Collins, says permanent changes to the instant asset write-off scheme are currently “unfit for purpose”.
“It’s about making sure that each budget, each year, is a response to the economy at the time, and giving the government of the day, particularly our government at the moment, the ability to carefully calibrate it like we have in this budget,” she told the publication.
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