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The government’s move to increase the threshold for the small business instant asset write-off has divided the tax community, with the US’ $1 million limit a stark comparison with the announced $25,000.
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‘A quantum leap above us’: Tax experts dissect instant asset-write off
31 January 2019
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9 minute read
Earlier this week, Prime Minister Scott Morrison pledged to increase the small business instant asset write-off to $25,000, up from $20,000. The measure will run till 30 June 2020.
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The government will be seeking to legislate the change when Parliament resumes on 12 February.
Speaking to Accountants Daily, the Institute of Public Accountants general manager of technical policy Tony Greco said that while the increase in threshold was a positive move, Australia was still lagging behind in its bid to stimulate the economy.
“While the announcement is welcomed, America for example, they’ve upped the ante quite substantially by allowing businesses to claim up to $1 million which is a quantum leap above ours and does incentivise people to replenish capital,” said Mr Greco.
The $1 million threshold increase was part of US President Donald Trump’s signature Tax Cuts and Job Act in December 2017.
Labor’s proposed Australian Investment Guarantee, a permanent feature which will allow businesses to immediately deduct 20 per cent of any new eligible asset worth more than $20,000, has also been considered as a more “business-friendly” initiative that could break the debate around a straight forward tax cut for bigger businesses.
“We are apolitical but the ALP policy has got a leg up on the current policy in the sense that you can claim 20 per cent upfront if the asset is above that threshold so it is particularly attractive to larger entities who might be contemplating capital investment,” said Mr Greco.
“The current government isn’t committing to the write-off being a permanent feature of the tax system and that’s one thing we’ve advocated for.”
Crowe Horwath national tax director Roelof van der Merwe said it was too soon to tell if Labor’s plans would help boost the economy.
“It is difficult to form a concrete opinion over which investment incentive would be better for the economy, especially because all details are not yet known,” said Mr van der Merwe.
“As with all things in tax, the devil is in the detail and once more info is available on this policy, we should be able to give a more conclusive opinion.
“Although the government’s incentive has constantly been extended by one year at a time, it may not always be the case going forward. Making an incentive permanent will provide more certainty for taxpayers to ensure their tax affairs are in accordance with the law.”
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