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The federal Treasurer has extended the $150,000 instant asset write-off scheme by six months to help businesses buy new and second-hand assets and help improve cash flow.
Earlier this year, the federal government announced that it was increasing the instant asset write-off threshold from $30,000 to $150,000 and expanding access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020. The boost write-off formed part of the government’s first “targeted” $17.6-billion stimulus package designed to “keep Australians in jobs, keep businesses in business and support households”, in light of the growing impact of the coronavirus (COVID-19) pandemic on the domestic economy.
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Federal Treasurer Josh Frydenberg has now revealed that the scheme will be extended until the end of the calendar year 2020 (31 December).
Speaking on Sky News, Mr Frydenberg said: “Extending it to the end of this calendar year will be seen as a very welcome move by businesses right across the country. For a number of businesses, it is very tough, but businesses are not just looking at today, they’re looking at tomorrow. And they’re looking at the restrictions being eased, people are getting back to work and getting back to their normal lives, and economic activity [going back to] as it was.
“So... this initiative has a view to the future and it’s encouraging businesses to take that next step to buy the equipment or the tools that they need, and to help them grow and help us to become more productive as a nation as well.”
The extension will give businesses additional time to acquire and install new or second-hand assets, such as trucks for a delivery business or tractors for a farming business.
Mr Frydenberg explained that businesses can use the instant asset write-off multiple times for goods that are purchased up to $150,000, which are then written off their tax bill. The threshold applies on a per asset basis.
“So, of course, it’s a great benefit for businesses because they may be put off a purchase for some time because normally they would need to depreciate it over a number of years, but now they can do it all in year one.
“It makes it a lot more tax-effective for these businesses to go out and get that equipment, and that will help the economic activities of this economy.”
When asked why the government was extending the scheme, the Treasurer said that while take-up had been “very strong”, he noted that business growth had slowed due to COVID-19.
He said: “What we want to do now, at a time when people are getting back to work and maybe demand is a bit slower than it was pre-crisis, is to encourage businesses to go out and to grow and to invest and to hire, and this is one of the measures to do just that.”
It is estimated that the scheme could support over 3.5 million businesses.
Legislative changes will be made to give effect to this measure, which is estimated to have a cost to revenue of $300 million over the forward estimates period.
[Related: Asset Assistance]
