IAWO trend continues as calls are renewed for permanency

The measure applies to small businesses with a turnover of less than $10 million a year and continues to be extended each year temporarily, despite the accounting and business communities pushing for it to be made a permanent feature of the tax system.

In a joint statement, Treasurer Jim Chalmers, Assistant Minister for Productivity, Competition, Charities and Treasury, Andrew Leigh, as well as Minister for Small Business, Anne Aly, said the IAWO extension would “modernise markets and protect consumers”.

As previously reported by Accountants Daily, The Tax Institute welcomed the extension of the measure for another 12 months, yet said the proposed temporary increase in the IAWO threshold for small business entities was an ongoing issue in the tax system.

The Tax Institute said from the measure still not being made permanent, uncertainty was created for taxpayers, their advisers and the administrator.

It was also suggested that the threshold be increased to $30,000 and an expansion of business eligibility to include businesses with an aggregated turnover of less than $50 million – a suggestion which has been voiced and supported by many within the tax community.

According to The Tax Institute, the IAWO threshold of $1,000 in section 328-180 of the Income Tax Assessment Act 1997 had remained in operation, as modified by subsection 328-280(4) of the Income Tax (Transitional Provisions) Act 1997, since 2015.

“Regular amendments to extend the measure on a temporary basis have created ongoing uncertainty for businesses, and often occur late in the financial year to which the IAWO extension relates,” the institute said.

“We consider that it is counterproductive to the policy of encouraging investment and productivity, particularly where the extension is given effect late in the year and only serves to confirm the tax treatment of earlier dealings.”

It was also added that the “trend” of annually making temporary changes to the rules governing whether a business could immediately deduct the cost of eligible depreciating assets was “inefficient, complex and unnecessary”.

CA ANZ also weighed in on the conversation and said it welcomed the Senate’s passage of legislation extending the IAWO, yet renewed its call for it to be made permanent to provide certainty and reduce red tape.

Susan Franks, CA ANZ tax and superannuation leader, reiterated the point that the measure has been clouded with uncertainty and extended by the government of the time, usually in the last days of a financial year, since 2015.

“The extension is a positive step, but the ongoing uncertainty around the IAWO each financial year creates unnecessary uncertainty for small business owners. It is encouraging that this latest extension for the 2025-26 financial year was able to pass in November, but a more concrete solution needs to be found,” she said.

Franks noted the main benefit of the initiative was the immediate tax relief, which could help with cash flow, therefore making it permanent would deliver certainty and reduce red tape for business, government and tax agents.

“We’ve advocated for some time, for policy makers to make the instant asset write-off permanent and with the government looking for ways to reduce red tape in the tax system for business, that would be a simple way to achieve this goal.”