Small businesses that have purchased assets since 1 July this year could be in for a rude shock, with parliamentary inaction meaning the extension to the asset write-off still awaiting approval.
The ATO confirmed that while plans were unveiled in the May budget to extend the $20,000 instant asset write-off for another year to cover 2018–19, this has yet to be approved.
“In the 2018–19 budget, the government proposed extending the $20,000 instant asset write-off (immediate deductibility) threshold to 30 June 2019. This change is not yet law,” it said on its website.
This filibustering in Canberra means that since 1 July, the threshold reverted to its original amount of $1,000.
As such, any business that made purchases within the last two months hoping to benefit from the immediate tax deduction will be left sorely disappointed. That could include businesses installing solar panels in preparation for the warmer months or to try and slash ballooning energy costs.
The leadership spill that ousted Malcolm Turnbull as prime minister last month led to the dismissal of the lower house, meaning that outstanding legislation was put on the back burner.
Peter Bembrick, a partner and tax consultant at HLB Mann Judd, suggested the impact may be limited, given that most asset purchases for tax deductions are made at the end of a financial year rather than at the beginning of one.
Nevertheless, confusion about where the legislation is currently at could be causing businesses to lose out.
“If somebody has gone ahead and bought an asset that they might not have needed immediately, but they thought they could get an instant write-off so would buy it now rather than waiting, [they could be caught out]… but they can buy it any time up until June,” Mr Bembrick told The Adviser sister title My Business.
“It’s not like you’re going to be penalised drastically by purchasing assets — the worst case is you buy an asset that you probably need anyway for your business, and you have to depreciate it over a period of time rather than getting an instant write-off.”
He advised small businesses to delay any non-essential asset purchases for several months to see whether the instant deduction is extended.
“We are still relying on the fact that it will be passed, but it’s fair to say that you can’t be guaranteed until it is legislation. So there’s no doubt there is some concern,” the tax consultant said.
Mr Bembrick added that the situation in Canberra has led to a great deal of uncertainty, with several other measures — including the Superannuation Guarantee Amnesty — also left unresolved.
“There is a general point about the lack of certainty, and unfortunately, that is a feature of our political environment that we’re in at the moment. And with elections looming, one of the big concerns we have is, are some of these measures going to be passed before the next election?
“There is a definite possibility that they won’t.”