ASBFEO Kate Carnell told the parliamentary house inquiry into impediments to business investment that the current $20,000 write-off policy “is a really good one” and would like to see it put into longer-term policy.
She said that a decision of just inserting the write-off again for the next budget “doesn’t give small business an opportunity to plan for a future investment”.
“In fact, we’d like to suggest that, with small business, could that amount be put up to, say, $100,000? Because the issue of major asset purchases, or major capital purchases, in small business is not just the capital purchase itself. It’s the whole red tape issue of depreciation and all the sorts of things that go with that,” Ms Carnell said.
“But with a small business, it’s not like they’ve got a whole lot of money floating around in the bank. For them to have a major investment into capital to grow their business, they need to be able to plan for that, and to be able to write it off immediately would be a huge benefit.”
Ms Carnell conceded that putting the write-off at an unlimited amount would seem unreasonable and unworkable. However, she said that businesses currently can write off five lots of $20,000 but can’t write off one lot of $25,000.
“The current rules are that you can write off $20,000 as often as you like during the year on assets that are under $20,000. But the moment you need a ute or a tractor or machinery for your factory, if it’s over $20,000, you’re out of the game,” Ms Carnell said.
“That seems for small businesses unfortunate, particularly as for most of those small businesses they’ll have to have the sort of money that will require planning.”
However in April, the Institute of Public Accountants general manager of technical policy Tony Greco said small businesses may be misconstruing the original incentive behind the asset write-off and may be interpreting it as $20,000 in tax relief.
“It’s not as if the government has given them $20,000. Sometimes it gets misspent, and they don’t fully understand how it works,” Mr Greco said.
“They think, ‘Well I’m getting $20,000 in tax relief’. No, they’re not. They’re just able to accelerate the write-off of the purchases and assets that helps with cash flow, but it’s still coming out of their pockets.”
