• Small Business - Federal Budget 2019

Higher instant asset write-off for small and medium business extended for 12 months. Yet again.

The Government will extend the current instant asset write-off for Small Business Entities (SBEs) until 30 June 2020 and increase the claimable threshold from $25,000 to $30,000 per asset.

Eligibility for the concession has also increased to medium-sized entity tax payers with an aggregated annual turnover of greater than $10 million but less than $50 million, however, only for new assets acquired before 1 July 2020.

These measures apply from Budget night. The Government previously announced an increase of the threshold from $20,000 to $25,000, and an extension for an additional 12 months to 30 June 2020. However, the Budget announcement, when legislated, will override these previously announced measures.

Simplified depreciation pools extended

This concession extends to allow small businesses to place assets which cannot be immediately deducted into the small business simplified depreciation pool. The small business simplified depreciation pool allows assets to be depreciated at 15% in the first year and 30% each income year thereafter. The pool balance can also be immediately deducted if it is less than the applicable instant asset write-off threshold during the income year.

The Government has not however opened the small business simplified depreciation pools to medium-sized businesses, and will instead continue to depreciate assets costing $30,000 or more, in accordance with existing depreciating asset provisions of the tax law.

‘Lock out’ laws continue to be suspended

The legislation restricts a SBE from re-entering the simplified depreciation regime for five years where they have opted out. However, the Government previously set aside these rules in conjunction with the instant asset write-off to allow universal access to the increased concessions for SBEs while they are available, and will extend their suspension of the ‘lock out’ laws until 30 June 2020.

BDO Comment

The Government obviously sees value in the annual re-announcement of this concession. Despite it being more accessible than before, providing taxpayers with certainty around capital expenditure rather than year-on-year extensions would be preferable. The extension of the instant asset write-offs to medium-sized businesses, which we anticipate will be those companies presently defined as ‘base rate entities’, will be welcome news for any company evaluating capital expenditure programs.

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