As the instant asset write-off scheme comes to an end, small businesses in Australia will need to act quickly to avoid the more onerous depreciation rules that will return from 1st July 2023.
After 30 June, businesses will need to depreciate any asset over $1,000 (or $100 for larger businesses with a turnover above $10 million). This will add significant red tape and expense for many small businesses, who have benefited from the instant asset write-off since 2015.
This will add significant red tape and expense for many small businesses, who have benefited from the instant asset write-off since 2015.
The scheme was temporarily extended to all businesses during the pandemic, as part of the government's support package, but now both
initiatives are coming to an end. Historically, business tax depreciation was a cumbersome process for smaller enterprises to administer.
The instant asset write-off has saved business owners significant dollars as it made depreciation less complex to administer.
SMEs that do not need to write off assets this financial year are advised to save the depreciation for when it is essential, depending on their business results.
Supply chain issues also pose a challenge. Even if businesses want to access the instant asset write-off, they must ensure the asset is installed and ready for use by 30 June 2023, or they cannot claim it. This is particularly difficult in an environment where some cars and large farm machinery can take up to six months to arrive.
Sectors that rely on physical assets, such as the agricultural, mining, and construction industries, will be most heavily impacted. While the government has announced initiatives such as the skills and training boost and technology investment boost, they are unlikely to have the same cut-through as the instant asset write-off.
The new 20% uplift deduction for businesses spending on training or digitisation will be beneficial, but it is specific and only for training conducted with registered training organisations. Access to the write-offs will be limited to businesses with an aggregated turnover below $50 million, and the training boost expires on 30 June 2024, while the technology scheme lasts only until the end of this financial year.
Small businesses are advised to take advantage of the instant asset write-off while they still can, and be aware of other government initiatives that may benefit them. Seeking professional advice is recommended, particularly for businesses in sectors that rely heavily on physical assets.
At Trinity Advisory, we specialise in tax accounting, advisory services, and business coaching for small businesses located in and around Cairns (116 Mulgrave Road, Parramatta Park QLD 4870) and the Sunshine Coast (2/8 Maroochydore Road, Maroochydore QLD 4558).
Should you need any taxation or accounting advice for your business, get in touch with Trinity Advisory today. Our team of expert Business Accountants, Advisors and Coaches are here to help!