Instant asset write-off threshold may be limited, warns tax specialist

The Support of Small Business and Charities Bill, which is yet to be passed after amendments were made by the Senate last month, will increase the instant asset write-off threshold but only for the 2023–24 income year.

Originally, this bill proposed that the bonus deduction would apply to the cost of eligible assets and improvements up to a maximum amount of $100,000, with the maximum bonus deduction being $20,000.

However, amendments made to the bill by senator Jane Hume will mean an increase in the threshold to $30,000, if passed by the lower house.

The amendments will also mean that a wider range of businesses can now access the measure. The instant asset write-off will apply to businesses generating less than $50 million. Originally the bill would have only applied to businesses with less than $10 million in turnover.

Jeffreys said while the increase in threshold will provide support for small businesses, with only two and a half months left in the financial year, it may be difficult for business owners to benefit from the measure.

The threshold for the scheme will drop back down to $1,000 from 1 July 2024 onwards, unless further changes are introduced by the government.

In a poll run by Jeffreys in a recent webinar, the majority of accountants said clients would likely cope with the recent changes when they’re passed while some accountants believed it could be a real problem for clients.

“The point is that there is only two and a half months left till the end of the financial year and the asset must be installed and ready for use by 30 June,” said Jeffreys.

“So if your client is thinking about ordering some new item, then they best get their skates on and ensure that it’s in place by the end of the financial year.”

Jeffreys said while the changes will “very likely be enacted”, this won’t occur till at least the budget sittings in mid-May.

It is also possible that the government may look to announce further changes to the instant asset write-off threshold in the federal budget in May, he said.

“In around a month’s time we shall see whether yet again the instant asset write-off is a game change,” he said.

“Or maybe they might just get around to putting something permanently in the law that won’t change. Wouldn’t it be good if we all just knew that it was going to be $30,000 from here on in for businesses with less than $50 million [in turnover]? Don’t hold your breath though.”

The Tax Institute has long advocated a permanent change to the scheme to be introduced for small- to medium-sized businesses for assets costing less than $50,000.

The Institute of Public Accountants has also previously advocated a higher instant asset write-off threshold becoming a permanent feature of Australia’s tax system.

“The need for this initiative to be set in stone, particularly for small businesses, is paramount as it brings an injection of economic growth, giving small businesses the confidence to buy new equipment, reinvest in their operations and grow,” said IPA chief executive Andrew Conway previously.

[Related: Two-thirds of SMEs used $150k asset write-off: ScotPac]