SMEs are being put on notice that once the instant asset write-off (IAW) scheme deadline is over in June 2023, they can expect to contend with significant red tape as arduous rules come into effect.
This IAW was introduced in 2015 and is applied when claiming a deduction for the cost of an asset. Small businesses could claim an immediate deduction for the business portion of the cost of an asset in the first year it was used or installed. It can apply to both new and second-hand assets, and to multiple assets that fall below the relevant threshold and must be included in the rules.
During the pandemic, the government allowed for temporary full expensing to help support the business sector. This move encouraged many owners to further invest in their businesses as tackling the business tax depreciation was made simpler. However, with the federal government seemingly having other priorities, this initiative is unlikely to be rolled forward.
Tax principal at RSM Australia, Belinda Crowley, has said that many SMEs will likely be caught unawares once the deadline has ended when they will need to depreciate any asset that is above $1,000. Businesses with a turnover over $10 million have a threshold of just $100. Those with an aggregated turnover of $500 million or more do not qualify for IAW on an asset. She said that these changes will prove to be burdensome for many businesses. Even those that have accountants and do not have to dedicate as much time to these tasks will still have to deal with additional expenses.
Crowley is recommending that businesses that do not need to write off assets this year save the depreciation until it becomes essential and they may be in greater need of a deduction that will lower their tax bill. She also pointed out that with current supply chain issues, many businesses would likely have ordered assets but not yet received them and had them installed as is required to apply for the IAW. She further noted that sectors such as agriculture, construction, and mining were more likely to be affected due to their reliance on physical assets.
Businesses with an aggregated turnover of less than $50 million are being further advised to take advantage of the new 20% uplift deduction which can be backdated to March 29, 2022, for relevant business spending on technology, and skills and training for staff from registered training organisations. The technology boost deduction is only available until the end of June 2023, while the training boost till the end of June 2024.
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