The Australian Government is encouraging small businesses to buy big after announcing an extension to its instant asset write-off tax incentive on assets that are individually worth up to $150,000.
Introduced in March, the tax incentive is available for businesses with an annual turnover of less than $500 million – with the government estimating 3.5 million Australian businesses fall into that category.
Second hand equipment is now eligible for the instant asset write-off under the extension. For assets to be eligible, they must be in use or ready for use by 31 December, 2020.
Treasurer Josh Frydenberg hopes the extended timeframe will keep businesses moving forward as the economy begins its road to recovery from COVID-19. “They are designed to support business sticking with investment they had planned, and encouraging them to bring investment forward to support economic growth over the near term,” Frydenberg said in a joint media release with the employment minister Michaelia Cash.
Changes to legislation will need to be made to cater for the six-month extension, which is expected to rack up a cost to revenue of $300 million.
The number of small businesses that have claimed the instant asset write-off will remain unknown until tax time.
Chief executive of the Australian Industry Group Innes Willox said the extension will help rejuvenate business investment in Australia.
“The announcement by the Treasurer of an extension of the instant asset write-off for businesses with turnover of less than $500 million is a sensible forward-looking measure,” he said.
“Business investment has been inhibited in recent months both by the drain on cash flows and the general level of uncertainty and the extension of this measure so that businesses have longer to put investment plans in place makes clear sense. “The write-off lift will give an immediate potential boost to business investment over the next few months. It will particularly help businesses that had put investment plans on hold or that are looking to reposition in the wake of the COVID-19 crisis.”