Managing finances and taxes can become increasingly daunting. Fortunately, there are instances when tax breaks can provide much-needed relief.
They are especially crucial for vital contributors to our community, such as small business owners. One notable opportunity is on the horizon for small businesses with the extension of the instant asset write-off scheme, which promises a significant financial boost.
This scheme is not just a tax break; it represents a lifeline for the ‘lifeblood’ of the Australian community—our small businesses.
Both major political parties have recognised the importance of this initiative and have committed to enhancing the instant asset write-off tax break scheme if they come out on top in the upcoming federal election.
Labor has pledged to extend the $20,000 instant asset write-off for another 12 months, a relief for many as it was set to revert to a mere $1,000 from 1 July 2025. On the other side, the Coalition is promising an even more generous offer, a permanent $30,000 instant asset write-off if they are elected.
Belinda Raso, the director of Tax Invest Accounting, said small enterprises face challenges from all angles, particularly with their tax obligations.
‘From the introduction of the single-touch payroll, that’s hurt employees, and it has cost them a lot. Then you’re looking at more regular reporting of GST, that’s not going to be a one-off. You’ve got payday super that’s coming in,’ she said.
Raso stressed that ‘They are the lifeblood of the community. They’re employing people all around the country.’
The instant asset write-off scheme allows businesses to claim an immediate deduction for the cost of an asset in the year it is first used or installed ready for use, rather than depreciating it over time.
This can apply to various purchases, from new tools for tradies to kitchen equipment for cafes and even computers and tablets for multiple businesses.
The scheme is available to small businesses with an annual turnover of up to $10 million and applies on a per-asset basis. This means multiple purchases can be written off instantly, providing significant tax relief and encouraging investment in new equipment.
The threshold for this write-off was once a modest $1,000, but the government has increased it to $20,000 in recent years.
Labor’s promise to extend this for another year means that assets first used or installed ready for use by 30 June 2026 will be eligible for the write-off.
Prime Minister Anthony Albanese stood by the decision not to make the increase permanent.
‘That’s the whole point so that you create that economic activity and the multiplier that flows through immediately, rather than say, “Oh well, don’t worry, sometime in the future, forever, you can do this. We want to encourage that economic activity now from small business and tradies”,’ he explained.
In contrast, in his budget reply speech, Opposition Leader Peter Dutton has committed to making the instant asset write-off a permanent fixture at $30,000, aiming to simplify depreciation, cut red tape, and lower business costs.
Industry bodies like CPA Australia and the Australian Chamber of Commerce and Industry advocate for the measure to be permanent.
‘Long-term certainty is crucial for businesses, and the full potential of this policy to support smaller businesses will never be realised if it remains an annual measure,’ Gavan Ord, business investment lead of CPA Australia, said.
‘In times of significant uncertainty, such as [the] US tariff announcement, businesses need the next government to adopt a long-term approach to providing incentives to the SME sector.’
The Australian Chamber of Commerce and Industry pushed for the measure to be established as a permanent fixture rather than assessed annually.
CEO Andrew McKallar described Labor’s announcement as ‘disappointing’, noting that last year’s initiative to prolong the $20,000 for this financial year barely made it through parliament.
‘Treating a measure which dictates how small business makes decisions to invest in capital as a year-to-year proposition just doesn’t measure up,’ he said.
‘The benefits of the write-off have been demonstrated in recent years, but the farce of year-by-year chaotic renewals needs to be replaced by a system that builds certainty and confidence.’
Have you used the instant asset write-off scheme? How has it impacted your business? Share your experiences and insights in the comments below.
Also read: ATO urgent alert: Cost increases for overdue tax debts are coming!
