News 23rd March 2020

Tax breaks & $150k asset write-off

Over the past two months, a lot has been written in the media about the state of the economy both here in Australia and overseas. The unknown impact of the coronavirus disease COVID-19 pandemic on world production has spooked investors and businesses alike.

In an attempt to lift consumer confidence and increase small business spending, the Australian government last week announced an economic stimulus package to the tune of $17.6 billion. According to the official media release by the Prime Minister’s Office, the package will have four main pillars. One pillar is set aside to provide cash flow assistance to help small and medium sized business stay in business and keep their employees in jobs.

Approximately $3.7 billion will be delivered to support small business investment. An amount of $700 million will be allocated to increase the instant asset write off threshold, which will be lifted to $150,000 from the current threshold of $30,000, and extended to businesses turning over $500 million per annum (also up from the current annual turnover of $50 million). This measure applies from the date of the announcement to 30 June 2020. Most business assets are eligible, meaning plant and equipment would fit under this umbrella. With respect to motor vehicles the limit for depreciation for any vehicle defined as a car remains capped at $57,581. Claiming depreciation on purchases costing more than this limit is only allowable under existing rules if the vehicle is not a ‘car’ as such, meaning it has to be “designed to carry a load of less than one tonne and fewer than nine passengers”.

The other part of this pillar will enable businesses to boost investment by introducing a time limited 15-month investment incentive through to 30 June 2021 by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct 50% of the cost of an eligible asset on installation with existing depreciation rules applying to the balance of the asset’s cost.

Whether the above measures will have the desired outcome remains unclear. With many small and medium sized businesses experiencing cash flow problems, careful planning will need to be done to ensure business owners have the confidence to set aside money and spend on capital items.

If you currently have plans for capital asset investment and would like to know how this announcement can benefit your business, please get in touch with our office.