For the past few years, the instant asset write-off scheme has been a boon for small businesses, allowing them to immediately deduct the full cost of eligible assets costing less than the $20,000 threshold.
This temporary increase from the original $1,000 limit was a welcome measure to stimulate investment and growth within the small business sector.
However, the scheme’s future is now uncertain as the measure has not been made permanent in the latest budget.
In a move that has sent ripples of concern through the small business community, the Australian Taxation Office (ATO) has issued a warning following the recent federal budget announcement.
The popular $20,000 instant asset write-off scheme, a lifeline for many small businesses, has not been extended, leaving owners with a narrowing window to capitalise on this significant tax break.
Mark Chapman, H&R Block’s director of tax communications, expressed his surprise and disappointment at the news, labelling it ‘unexpected bad news’ for small businesses.
The current level of the instant asset write-off is set to end on 30 June 2025, reverting to a mere $1,000 from 1 July 2025.
‘This means that small businesses have a very limited opportunity to take advantage over the next three months,’ he says ‘assuming the government can get its $20,000 threshold through Parliament.’
The sense of urgency is palpable among industry leaders.
Innes Willox, chief executive of the Australian Industry Group, described the failure to continue the scheme as ‘alarming’, pointing out that the program’s uncertain legislative status already causes significant uncertainty for businesses.
This is compounded by new concerns about its future, which could potentially stifle business investment and planning.
Echoing this sentiment, Andrew McKellar, CEO of the Australian Chamber of Commerce and Industry, has called for the extension to be legislated permanently.
He argued that it should be made a ‘feature of the tax system for investments worth up to $50,000 and available to businesses with an annual turnover of up to $50 million.’
The instant asset write-off allows businesses to claim an immediate deduction for the cost of an asset rather than depreciating it over time.
The boosted $20,000 threshold applies to small businesses with an annual turnover of $10 million for assets first used or installed and ready to use between 1 July 2024 and 30 June 2025.
The threshold limit is also applied on a per-asset basis, meaning businesses could write off multiple assets.
While the boosted threshold has not been legislated for the current financial year, the budget did include some relief for small businesses.
An extension of the energy bill relief scheme will see around one million small businesses benefit from a further $150 energy bill discount, automatically applied to electricity bills in quarterly $75 instalments until the end of the year.
Moreover, workers can look forward to additional tax cuts in 2026 and 2027, with the tax rate for the lowest bracket set to be cut from 16 to 14 per cent.
By 2026, individuals earning around $79,000 annually can expect their tax bills to decrease by $268 with the 15 per cent rate, and this saving will double to $536 when the rate falls to 14 per cent.
Additionally, the government has flagged the potential abolition of non-compete clauses for workers earning less than $175,000.
As small business owners navigate these changes, it’s crucial to stay informed and seek professional advice to understand the full implications of the budget on their operations.
With the landscape of tax breaks shifting, proactive planning and swift action could be the key to maintaining financial health and seizing any remaining opportunities.
We understand the importance of these issues to our readers who own or are involved in small businesses. We encourage you to share your stories and concerns in the comments below.
How will the end of the $20,000 instant asset write-off impact your business? What strategies are you considering to mitigate this change?
Also read: ATO’s big shake-up: Will your business be affected?
