• Business

Higher instant asset write-off for small businesses extended for 12 months

Last year’s Budget introduced a number of welcome Small Business Entities (SBEs) concessions including a more generous instant asset write-off for SBEs, and changes to the simplified depreciation regime with a view to improving cash flow for the small end of town. This concession raised the instant write-off threshold from $1,000 to $20,000 with an end date pencilled in for 30 June 2017.

The Government has indicated it will extend the SBE instant asset write-off concession on assets costing less than $20,000 by 12 months until 30 June 2018. This concession extends to small business simplified depreciation pools to allow eligible taxpayers to write-off the pool balance where the total written down value is less than $20,000.

‘Lock out’ laws suspended

The legislation restricts an SBE from re-entering the simplified depreciation regime for five years where they have opted out. However, the Government has set aside these rules to allow universal access to the increased concessions for SBEs while they are available.

BDO Comment

The Government obviously sees value in the extension of these measures with an estimated cost to revenue of $650 million over the forward estimates period. We note that while the definition of an SBE (turnover less than $10 million) is more accessible than it has been in the past, the majority of Australian businesses will miss out.

Further, with the write-off threshold set to return to $1,000 on 1 July 2018, businesses may be pressured into debt financing depreciable assets ahead of schedule in order to take advantage of the measures. BDO suggest the Government would realise more consistent spending over the longer-term where the instant asset write-off was not subject to time pressures.