Instant asset write offs up to $150000 extended till year end

Instant asset write offs up to $150000 extended till year end
Tax

Instant asset write offs up to $150000 extended till year end

Businesses will be able to claim instant asset write offs up to $150000 extended till year end for accelerated depreciation on new asset under the latest extension of the asset write-off program unveiled by Treasurer Josh Frydenberg on Tuesday.

After expanding the program from assets worth $30,000 to $150,000 in response to the COVID-19 pandemic in March, the federal government has now extended the deadline for making claims from July 1 to December 31.

Until today, the $150,000 write-off was due to expire at the end of this month.

The adjustment falls short of calls from advocates, including small business ombudsman Kate Carnell, for the scheme to be made permanent, but it will nevertheless provide firms earning up to $500 million a year with an extra six months to process their asset claims.

Treasurer’s New Reasoning

Frydenberg said the extension is expected to cost taxpayers $300 million over the next four years. However, uptake of the scheme is uncertain because it is demand-driven and requires firms to first buy assets out of their own pockets.Get COVID-19 news you can use delivered to your inbox.SubscribeYou’ll also receive special offers from our partners. You can opt-out at any time.

“We’ve seen strong takeup of this program in the past,” Frydenberg told Sunrise on Tuesday.

“We know that when the restrictions are eased and people are back at work that our cafes and restaurants will be busy, our hotels will start having occupants again and our businesses will be able to import and export.”

The instant asset write-off scheme enables businesses to immediately deduct the value of an asset in the year of purchase, instead of claiming deductions over several years. Businesses can claim multiple assets.

Extension – Yes. But There Are Issues

The latest extension is not the first in the history of the program, which was initially unveiled in 2015 and has been bolstered half a dozen times since; the size of the write-off is currently more than six times higher than the original $20,000.

But while the write-off has been a pillar of the federal government’s small business policy in recent years, there have been longstanding questions about its usage across the sector.

Several surveys have suggested most firms don’t have the capital to make use of the program, while tax office figures in 2016-17 revealed fewer than 350,00 businesses claimed something, despite predictions millions of firms would benefit.

The average amount claimed over that time was just $11,000 of the then $20,000-cap, according to the ATO.

The Treasurer provided no further figures about usage of the write-off since the coronavirus extension was put in place in March, although this data is likely to come through with tax returns due to be filed over the coming months.

SOURCE: SmartCompany 9th June 2020

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