Small- to medium-sized businesses are being reminded they have just weeks left to make the most of the government’s increased instant asset write-off offer, with many businesses currently overlooking the opportunity despite it being five times the usually available amount.
Three-quarters of small- to medium-sized businesses are turning away from the $150,000 instant asset write-off opportunity and looking towards other government concessions, a specialist business lender has revealed.
It is noted that businesses have turned their attention to other COVID-19 incentives and appear to have “forgotten” the $150,000 write-off per asset available to them through the ATO.
“Maybe it’s because they’ve not had the time needed to really consider what they need to support and grow their business in terms of an injection five times what they were originally considering at the start of the financial year”
“Maybe they don’t know how to go about securing the monies? Especially smaller private companies with a turnover of less than $50 million that have likely structured their business financing in a way that’s unique to them”
The government announced in March it is injecting $700 million to increase the instant asset write-off from $30,000 to $150,000, with the aim to encourage more businesses to buy big-ticket items such as cars and equipment.
Access to the write-off has also be expanded to include businesses with aggregated annual turnover of less than $500 million, up from $50 million.
But the expanded measure will only run until 30 June 2020.
According to the ATO, this new threshold of $150,000 applies for a limited time only for depreciating assets first used or installed ready for use between 12 March 2020 and 30 June 2020. After 30 June 2020, the threshold will reduce to $1,000.
Last month, professional services firm RSM explained that most tangible assets that decline in value over time will be eligible for the instant write-off, except a small number of exclusions.
Among the excluded assets are trading stock items, land, non-farming buildings and capital works, horticultural plants, water facilities, fodder storage assets and farm fencing.
While motor vehicles will be eligible assets, the car cost limit of $57,581 for 2019–20 will still apply to cap deductions for cars, RSM reminded.
Recognising that COVID-19 has yielded an unprecedented business environment, we believe that businesses must start looking forward.
He sees the current period as the perfect opportunity for businesses to maximise financing opportunities in the framework of their long-term strategic plans, especially given the low interest rates.
For more information, visit ato.gov.au/instantassetwriteoff
Finance Circle Group recommends that customer seek advice from their accountants and Financial Adviser and ensure that their cash flow will be able to afford further loan payments in all circumstances.
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