Instant Asset Write-Off Legislation

“Laws are like sausages; it is better not to see them being made.” Otto von Bismarck.

What is the instant asset write-off for small businesses? The provisions in Subdiv 328-D of the ITAA 1997 allow an eligible small business entity (SBE) taxpayer (annual turnover of less than $10 million) to bring forward 100 per cent of the depreciation deduction of the cost of an eligible asset to the current income year rather than writing it off over multiple years. The standard and legislated threshold is $1,000 — that is, eligible assets with a cost of less than $1,000 may be fully depreciated in the year in which the taxpayer starts to use the asset, or have it installed ready for use, for a taxable purpose.

There have been many temporary thresholds over the years. However, from 1 July 2023, the threshold for SBEs reverted to $1,000. Medium and large businesses with turnover greater than $10 million, no longer had access to an immediate deduction. At time of writing this is the current status of legislation.

• In last year’s Federal Budget, the Government announced that it would temporarily increase the threshold to $20,000 for SBE’s (from $1,000) from 1 July 2023 to 30 June 2024.

• Legislation to give effect to this change has not passed Parliament. Indeed, 10 months later, on 27 March the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 was amended by the Senate to increase the $20,000 threshold to $30,000 and to extend the measure to medium entities with turnover of $10 million to less than $50 million, and returned to the House of Representatives for consideration.

• On the morning after the Budget, 15 May 2024, the House disagreed to the Senate amendments and the Bill – with the original $20,000 threshold – was returned to the Senate.

• At the same time, in the 2024 budget announcement last week, the Treasurer indiacted that the $20,000 threshold would be extended for the 12 months ended 30 June 2025. That is, he will extend a law that has not been passed.

• The next day, 16 May 2024, the Senate rejected the Bill again and insisted on its proposed amendments.

So, as we are preparing client tax estimates and planning in May 2024, are businesses entitled to claim an immediate deduction for of the cost of an eligible asset less than $20,000 acquired in the 2023-24 year, or less than $30,000, and what is their position if their turnover is greater than $10 million? Yeah, we don’t know.

By Pete Debus