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Urgent Call to Small Businesses: Take Advantage of the Instant Asset Write-Off Before It Dwindles
Small to medium-sized businesses, particularly tradies, face an imminent deadline to leverage the currently available $20,000 instant asset write-off scheme, which is set to substantially decrease after June 30. Introduced to support small businesses, this policy has provided a significant tax benefit that allows for immediate deductions on asset purchases. However, the clock is ticking.
In an announcement last year, the government confirmed the extension of this tax benefit until the end of the current financial year. Yet, as of now, there’s been no confirmation of any further extensions or increases to this cap. Should the scheme not be renewed, from July 1, businesses will only be able to write off a maximum of $1,000 per asset.
Act Quickly: Installation and Readiness Requirements
Alex Molloy, co-founder of Valiant Finance, has indicated that businesses need to act swiftly, stressing that any assets must be either installed or ready for use prior to the new financial year. He advises checking eligibility with an accountant and assessing the combined long-term return on investment for any significant acquisitions. This strategy not only could reduce taxable income but also enhance cash flow leading into the 2025-26 financial year.
The instant asset write-off enables businesses to claim deductions for work-related assets in the same year they are installed or ready to use, a marked benefit compared to the traditional method that spread the cost over several years.
Who Qualifies?
To qualify for the $20,000 write-off, businesses must have an annual turnover of less than $10 million. The scheme also allows enterprises to write off multiple purchases, given that the $20,000 threshold applies per individual asset.
For assets priced at $20,000 or above, businesses can still place these in the small business simplified depreciation pool, depreciating at a rate of 15% in the first income year and 30% in subsequent years.
Opportunities for Tradies and Businesses
Tradies have been able to invest in essential tools and equipment, while other small enterprises leverage the scheme for vital machinery and technology. Reece Ketu, Moneytech’s head of group sales and distribution, stated that the write-off scheme is crucial for forward planning, whether it involves upgrading underperforming tools or expanding an operational fleet.
Ketu emphasised the urgency to utilise the write-off before it potentially vanishes: “For many small and medium-sized enterprises, this may be the last chance to maximise tax outcomes while upgrading essential assets.”
Future Uncertainty
Currently, the government has not indicated when or if the instant asset write-off will be reinstated in the future. The subject was notably absent from Treasurer Jim Chalmers’ recent budget presentation, although promises were made during Labor’s election campaign to not only extend the scheme but potentially enhance the cap to $30,000.
Industry Advocates Demand Clarity
Industry groups, acknowledging the importance of this scheme, are urging for it to be made permanent rather than be subject to annual evaluations. Gavan Ord from CPA Australia voiced that long-term stability is essential for businesses, arguing that the true potential of the write-off policy cannot be realised if it’s treated as an annual measure. Similarly, Andrew McKellar, CEO of the Australian Chamber of Commerce and Industry, lamented that having this policy reset annually creates uncertainty for small businesses aiming to make capital investments.
In summary, the impending reduction of the $20,000 instant asset write-off underscores the necessity for small businesses to act promptly in order to make significant tax savings. As stakeholders continue to advocate for clearer and more stable policy directions, businesses now find themselves in a race against time. Should you have any potential asset acquisitions in mind, it is advised to consult with a financial professional to optimise your opportunities before the upcoming cut-off.
