From navigating the choppy waters of economic uncertainty to deciphering the ever-shifting sands of government incentives like the instant asset write-off, Australian small and medium-sized enterprises (SMEs) are facing a complex landscape when it comes to securing the assets they need to thrive.
With the recent federal election, there has been uncertainty as to what, if any, support would be forthcoming from the new administration. The future of the instant asset write-off (IAWO) has been a significant point of contention, casting a shadow of uncertainty over SMEs across Australia and holding back investment.
While the IAWO scheme had been incredibly popular in recent years, the fact that the legislation for the financial year 2025 only passed a few months ago (with just a few months left for SMEs to take advantage of it) means asset finance demand has slowed right down.
Plus – for most of this financial year – SMEs have not known what the future of this scheme would be. In the lead-up to the federal election, for example, both major political parties had made commitments regarding the future of the IAWO; Labor had pledged to extend the $20,000 IAWO for another year if re-elected (allowing small businesses to deduct the cost of eligible assets used or installed by 30 June 2026), while the Coalition had promised to make the IAWO permanent, with a $30,000 cap for businesses with turnover up to $10 million.
But industry bodies and brokers have been advocating a permanent and more substantial scheme to provide the stability businesses need.
The Commercial and Asset Finance Brokers Association of Australia (CAFBA) has said that expanding the scheme each year is only a “short-term sweetener”, calling for the scheme to be made permanent and significantly boosted to $150,000.
This uncertainty surrounding the IAWO is just one piece of a larger puzzle that brokers are helping their SME clients navigate. Will Hamer, director and principal broker at Hamer Asset Finance, says asset finance demand has been subdued as businesses remain cautious.
“Right now, they’re keeping a close eye on their bank accounts and building up rainy day funds … businesses are being cautious – especially with the end of financial year approaching. There’s definitely small hints of hesitation around making big purchases in the equipment space, probably due to the election, which always tends to stall spending,” he tells The Adviser.
While the IAWO is intended to stimulate investment, Hamer raises important considerations: “The Instant Asset Write-Off is a great, direct way to implement tax relief and to better cash flow – we do love this scheme in our space.
“While it’d be great to see the $150,000 limit come back, I think a range between $30,000–$50,000 strikes a better balance – enough to support businesses without encouraging overspending.
“That said, based on my conversations with clients, there needs to be more education around what happens post-purchase, especially if the asset is sold shortly after and the tax implications that come with that. It’s promoted as a win for business – and I align with this – but like any financial decision, it’s important to think long-term, not just chase the upfront tax benefit.”
George Dib, co-founder and CEO of commercial franchise brokerage Co-Pilot, agrees, saying: “It should be made permanent by the government and the higher the better. There’s no value in anything under $30,000. The amount of activity when it was $150,000 is what is needed right now to stimulate the SME community.”
Overall, he says the scheme would improve asset finance confidence, highlighting the mixed signals he’s observing in the market: “Honestly, the trends we’re seeing from SME clients are all over the place at the moment. A lot of it comes down to the current economic climate and what we’re hearing from the market and our dealer partners – there’s no consistent pattern.
Honestly, the trends we’re seeing from SME clients are all over the place at the moment … the SME market isn’t following a clear trend right now, and asset finance needs are varying wildly from business to business
– George Dib, co-founder and CEO, Co-Pilot
“Electric vehicles aren’t coming through as much as you’d expect. Most of our clients are still going for petrol or diesel vehicles. There’s also been a drop in demand for luxury cars compared to the post-COVID period.
“We’re seeing more hesitancy when it comes to buying new. A lot of businesses are under pressure – we’re getting more inquiries around funding to clear ATO debt or to help get through a tough period. That said, there has been a noticeable uplift in new businesses coming through, looking to purchase assets to fulfil new contracts.
“So while some are in survival mode, others are gearing up to deliver on growth opportunities. Interest rate drops will impact the above positively. All in all, it’s a bit of a mixed bag – the SME market isn’t following a clear trend right now, and asset finance needs are varying wildly from business to business.”
Despite the uncertainty, asset finance remains a critical tool for SMEs, enabling them to acquire the necessary equipment to operate and grow. And it’s the role of the asset finance broker to help them understand and access it so they can make informed decisions that align with their long-term business goals.
Sam McDonald from Atlas Broker emphasises the importance of ensuring the asset will generate returns: “Anyone acquiring a new asset needs to be getting a return on that equipment … If a client doesn’t know what the equipment does or what it’s going to do. My advice is probably not to purchase that equipment.
“One of the biggest things when structuring is knowing the asset life. For example, concrete gutters and concrete grinders ... while the equipment is incredibly hardy, it cops an absolute beating. So, you don’t want to do five-year terms on equipment that’s going to last three years.
“You’ve got to know the equipment’s effective life and make sure the finance is over the same period. Or, if you know the client is going to look to resell the equipment when the loan term’s finished, ensuring that the balloon repayment is not going to be larger than what they think they can resell it for.”
