A recent article written by Belinda Crowley, a tax principal at RSM Australia, has advised small businesses to act promptly in order to meet the deadline for the instant asset-write-off (IAW) scheme, otherwise, they may face significant bureaucratic hurdles once the stricter regulations are reinstated.
She stated that numerous small business and medium-sized enterprises (SMEs) would be caught off guard by the deadline and would be required to depreciate any asset worth over $1,000 after 30th June 2023.
This could be a significant time and financial burden, particularly for small businesses. Even if their accountants manage it on their behalf, it would still be an extra cost for them.
IAW has been a feature for small businesses since 2015. The government had introduced temporary full expensing as part of its support program for businesses of all sizes during the pandemic. These initiatives encourage business owners to invest in their enterprises. However, both schemes are now ending.
Accounting for occasional high-value assets of, say, $ 30,000, and doing the same for any asset valued over $1,000 (or $100 for larger businesses) created one of the most significant challenges. Crowley also suggested that SME’s that don’t require an asset write-off in the current financial year should save the depreciation for when it’s necessary.
Business owners must exercise caution and seek professional assistance before making a decision, if they are currently experiencing a challenging period and do not need the deduction to reduce their tax bill. It is also worth noting that supply chain disruptions mean that even if a business wants to buy an instant write-off asset, as the asset must be installed and ready for use before 30th June, 2023, or it will not be eligible to be claimed. Therefore, it is critical to be certain that the asset will be available and operational on the site before the 30th of June.
Although the government has announced initiatives such as the skills and training boost and technology investment boost, they are unlikely to have the same impact as the instant asset write-off.
SME’s should take advantage of the new 20% uplift deduction, which was highlighted a priority in the federal budget for areas such as environment, digitalization, and training. This deduction allows businesses to receive a $120 deduction for spending $100 on training or digitisation, with the incentive backdated to March 29, 2020. This benefit is very specific and only applicable to training conducted with registered training organizations, making it difficult for SME’s to access. Additionally, access to write-offs is limited to businesses with an aggregated turnover below $50 million, and the training boost expires on June 30, 2024, while technology scheme only lasts until the end of this financial year. The uplift deduction would not be consistently beneficial across sectors, as some industries , such as agriculture, rely more on-the-job training than formal accredited courses.
If you need to discuss how you can utilize the IAW measures for your business please contact us. To read more detail about these measures please click here.