The Treasury Laws Amendment (Increasing the Instant Asset Write-Off for Small Business Entities) Bill 2019 was passed by the Senate and the House of Representatives this morning, with 18 government amendments which give effect to the federal budget announcement to increase the threshold to $30,000 and expand the eligibility to medium-sized businesses with a turnover of less than $50 million.
While the amendments have passed, the bill does not become law until it receives royal assent.
The amendments mean that there will be three tiers for accountants and their clients to consider within the 2019 financial year, due to Prime Minister Scott Morrison’s announcement to raise the threshold to $25,000 in January.
The first tier will be the $20,000 threshold for depreciable assets that are acquired before 29 January 2019; the second being the $25,000 threshold for assets first used or installed between 29 January 2019 and 2 April 2019; and the third tier being the $30,000 threshold for assets first used and installed after the 2 April budget announcement and before 1 July 2020.
TaxBanter senior tax trainer Robyn Jacobson said that the new changes meant that accountants and taxpayers would need to pay special attention to the start dates and threshold values to determine eligibility.
“From 1 July 2020, the threshold reverts to $1,000 for small business entities only. Medium-sized business will need to work out their asset’s decline in value under the ordinary depreciation provisions after 30 June 2020,” Ms Jacobson said.
“The lifting of the threshold and extending the availability of the concession to many more businesses is most certainly a positive step. However, it does leave businesses in a situation where they will have to wrangle with three different thresholds in the 2019 income year if they want to actually claim the offset,” said the Tax Institute’s senior tax counsel, Professor Robert Deutsch.
“You really have to read the fine print. Such a simple concession so favourable to small business is unnecessarily complicated for the 2019 income year. If you don’t get the timing or the amount right, you could miss out.”
Likewise, RSM senior manager Tracey Dunn believes the changes will mean that clients will need to rely heavily on their accountants to work through each tier and determine eligibility.
“Sadly, it may mean more compliance costs as they will no doubt need the assistance of their tax adviser to determine which depreciation method is most appropriate for their business and whether they are even eligible for the instant asset write-off,” Ms Dunn said.
“With a three-tiered asset threshold and staggered commencement dates throughout the 2019 financial year, small business taxpayers will need to review their records carefully in order to determine which assets are eligible for the instant asset write-off and which are not.
“Given the complexities around accessing the instant asset write-off, determining what is an eligible asset along with determining the appropriate threshold and commencement date, small business taxpayers are strongly advised to seek advice from their tax advisers before purchasing assets.”