More than a third of SMEs are unaware of the extended instant asset write-off, which represents a “key opportunity” for brokers, an SME lender has said.
Following on from warnings that small businesses are “concentrating” on other stimulus measures released by the government throughout the COVID-19 pandemic and appear to have “forgotten” the availability of the $150,000 instant asset write-off through the ATO, which is in place until 30 June, new research has shown that a third of SMEs are actually unaware of the new scheme.
According to research conducted online in April 2020 by Honeycomb Strategy on behalf of SME lender OnDeck, 35 per cent of the 300 surveyed Australian small and medium-sized enterprises (SMEs) have not heard of the instant asset write-off.
Under the instant asset write-off, businesses can claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used, or installed ready for use.
The government announced earlier this year that it was extending the instant asset write-off from $30,000 to $150,000 and expand access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) up until 30 June 2020. The extension aims to act as a means of support for SMEs during COVID-19.
According to OnDeck, while a third of SMEs didn’t know about the write-off, nearly half (46 per cent) of those who did said they would be likely to take advantage of the new upper limit. Nearly half (46 per cent) said they planned to use the tax break to invest in IT equipment, and the same proportion said they would look to use it for vehicles (although the Australian Taxation Office has indicated that the instant asset write-off for passenger cars is limited to the business portion of the car limit of $57,581 for the 2019-20 income tax year and that the excess cost of the car cannot be claimed under any other depreciation rules).
A smaller proportion of SMEs looking to use the write-off were looking to use it for manufacturing equipment and machinery (19 per cent) and office furniture (15 per cent).
The lender’s national broker channel manager, Robbie Fidler, outlined that the findings present a “key opportunity” for brokers to educate their business clients on the scheme before the increased asset write-off.
Mr Fidler said that the write-off was available to 3.5 million Australian businesses, adding it was therefore “a concern that over 1 million enterprises could miss out on the opportunity to save on tax today while investing for tomorrow’s growth, because they are unaware of this tax break”.
“This highlights the value of brokers having conversations with their SME clients around the availability of the instant asset write-off, and the fact that it is worth $150,000 until 30 June 2020,” he said.
The survey also found that two-fifths (41 per cent) of respondents outlined that a small business loan would help them take advantage of the instant asset write-off.
Mr Fidler added that it was therefore “critical” for brokers to be aware that “fast-tracked funding” was available, highlighting that the fintech lender had an “accelerated application process”.
“With 30 June just around the corner, it is critical for brokers to connect with their SME clients and get finance underway. Time is of the essence. In order to claim the newly enlarged $150,000 instant asset write-off, the asset needs to be in place and ready to use by 30 June 2020 [according to the ATO],” he said.
[Related: SMEs missing out on government concessions]
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