IPA supports government’s instant write-off extension
The Institute of Public Accountants (IPA) has commended the government’s announcement to not only extend the instant asset write-off for small business but also the increase in the limit from $20,000 to $25,000.
The PM Scott Morrison announced on Tuesday that the $20,000 write-off will be extended to 30 June, 2020, and will be increased by $5,000.
This will allow businesses with less than $10 million in turnover to write off purchased assets under $25,000 in their tax return up until mid-2020.
The IPA chief executive officer, Andrew Conway, noted that the IPA supports any increase of the threshold, but hopes it will become a permanent feature of government policy.
"The IPA advocated for the introduction of this initiative and have continued to argue the case for the instant asset write-off to become a permanent feature of the small business tax regime and not just a ‘maybe’ come federal budget time each year," said Mr Conway.
"The extension of this initiative through to 2020 will give reassurance to small businesses looking to invest in their business for future growth," he added.
In 2018, the Australian Small Business and Family Enterprise Ombudsman’s (ASBFEO) recommended to substantially increase the current $20,000 instant asset write-off, first introduced in 2015, to $100,000.
"When it comes to small business, cash-flow is king and ensuring this policy is instilled into the system provides some certainty.
"If small businesses can invest in their business, whether it be plant and equipment, vehicles or technology or anything else to make them more productive, that has a direct, positive impact on the economy, including the propensity to expand and employee more people," Mr Conway said.
He explained that many small businesses still misconstrue the original incentive behind the asset write-off, interpreting it as $20,000 in tax relief.
"If a small business thinks it is tax relief, they are mistaken. This measure merely allows them to accelerate the write-off of the purchases and assets and that helps with cash flow, but they must remember it’s still coming out of their pockets. Regardless of the threshold amount, they have to have access to the funds," said Mr Conway.
He concluded that small business owners should obtain advice from their trusted adviser before undertaking any capital investment.