Instant asset write off for SME’s increased, expanded and extended
The 2019-20 federal budget announcement on 2 April 2019 has backed small and medium-sized businesses through tax relief and by increasing and expanding access to the instant asset write off.
In a move to provide small and medium sized businesses with greater incentives to invest and grow, the instant asset write-off threshold has been increased to $30,000, the eligibility has expanded to companies with a turnover of less than $50 million giving medium sized businesses access to the scheme, and the cut-off date has extended to 30 June 2020.
This means that if you buy an assetand it costs less than $30,000 before this date, you can write off the business portion in your tax return for the relevant income year. The threshold applies on a per asset basis, so eligible businesses can instantly write off multiple assets.
Prior to the announcement last week, the scheme was only available to businesses that generated less than $10 million a year, the claim was also set at $20,000 and the deadline was in June this year.
Described by the Government as the ‘engine room of the economy’, small and medium-sized businesses employ more than 7 million workers across the country. The budget has announced that ‘it will continue to lighten their load so they can do what they do best’ by offering incentives and also lowering the business taxes.
Instant asset write off increased to $30k
Reducing the corporate tax rate
To understand the budget announcement for reducing the corporate tax rate for businesses, it is useful to look back at the Treasury Laws Amendment Bill 2018.
On 16 October 2018, the Government introduced the Treasury Laws Amendment (lower taxes for small and medium sized businesses) Bill 2018* to accelerate the future reductions in the corporate tax rate as follows:
- 5 per cent for the 2019-20 income year (as previously legislated)
- 26 per cent for the 2020-2021 income year
- 25 percent for the 2020-21 income year and subsequent income years
This bill received Royal Accent on 25 October 2018.
The budget has stated it will fast-track the company tax rate cut to 25 per cent for small and medium‑sized companies with an annual turnover of less than $50 million by 2020-21, which is five years earlier than planned.
The Government has also legislated to advance the increases to the unincorporated small business tax discount rate, rising from its current 8 per cent to 13 per cent in 2020-21 and to 16 per cent from 2021 (up to the existing cap of $1,000). This will benefit around 2.4 million businesses, employing around 1.9 million workers.
For a detailed breakdown of the Federal Budget 2019-20 click here
If you have any questions about the Federal Budget announcements and how it may affect you, please contact us on 08 9240 7629.
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