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Government announces enhanced tax concessions to support business capital investment

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The coronavirus is first and foremost a public health issue, but it is also having a major impact on the economy. The government has announced a comprehensive stimulus package – the first totaling $17.6 billion – to confront these challenges. In particular, the government and Reserve Bank have set out to cushion the blow for Australian businesses with a number of initiatives to support business capital investment through enhanced tax concessions.

The first of these measures is an increase in the instant asset write-off (IAWO) threshold from $30,000 to $150,000. It has also been expanded to include all businesses with aggregated annual turnover of less than $500 million – that’s about 99 per cent of all Australian businesses.

This is only a temporary measure and businesses will need to act quickly to take advantage of this offer – it will only apply to eligible depreciating assets that are first used or installed ready for use between 12 March 2020 and 30 June 2020.

After this time, the asset threshold will revert to $1,000 and the instant write-off will only apply to small businesses with aggregated turnover of less than $10 million.

The second of these measures – Backing Business Investment – is an accelerated depreciation deduction for all newly acquired depreciating assets (it will not apply to second-hand assets).

Under this initiative, businesses will receive a tax deduction of 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost. This measure will apply for approximately 15 months to eligible new depreciating assets acquired from 12 March 2020 and first used or installed by 30 June 2021.

Significantly, there is no limit to the cost of a depreciating asset that can qualify for this concession.

It’s vital that businesses thinking about taking up this offer seek professional advice from their accountant.

Each business is different; however, there are potentially some significant benefits for businesses that act now and take advantage of these measures:

  • Businesses that take advantage of these enhanced tax concessions will experience the benefits almost immediately in the form of reduced taxable income and tax payable.
  • There is quantifiable evidence that demonstrates the benefits of instant asset write offs to business. In 2017-18, over 360,000 businesses benefited from the scheme then in place, claiming deductions over $4billion. The current package has been greatly expanded. Previously, the scheme was only available to businesses with an aggregated turnover up to $50,000 and with a threshold of $30,000.
  • The package provides a strong incentive for businesses to buy, rather than hire, new assets – the full cost of assets under $150,000 can be written off if the asset is acquired and in use by June 30, 2020. 
  • The benefits will be realised through the current tax system, so there will be minimal red tape and additional administrative work required to access the scheme.
  • The Reserve Bank has announced record low interest rates with a cash rate of 0.25 percent expected to be in place for at lease three years. The RBA has also extended a term funding facility for the banking system, with particular support for credit to small and medium-sized businesses.

RDO Equipment is well resourced to meet customer demand and, at this point in time, do not expect any supply chain issues.

Download our Government Economic Stimulus Package information sheet

 

Federal Budget 2020-21 update

Supercharged instant asset write-off

The Government will extend the tax incentives that currently apply to business capital investment announced early this year as part of the COVID-19 stimulus package, in the hope that this will continue to drive business investment and jobs growth.

Specifically, the Government has announced an instant asset write-off to support businesses with aggregated annual turnover of less than $5 billion. This will enable eligible businesses to claim a tax deduction for the full cost of eligible capital assets, acquired from 7:30pm AEDT on 6 October 2020 (Budget night) and first used or installed by 30 June 2022. The measures are summarised in the table below:

 

Aggregated annual turnover less than $5 billion

Aggregated annual turnover less than $50 million 

Tax Deduction

Full cost of eligible capital assets in the year of first use for:

·         new depreciable assets, and

·         the cost of improvements to existing eligible assets.

Full cost of eligible capital assets in the year of first use for:

·         new or second-hand depreciable assets, and

·         the cost of improvements to existing eligible assets.

Acquired from

7:30pm AEDT on 6 October 2020 (Budget night)

7:30pm AEDT on 6 October 2020 (Budget night)

First used or installed by

30 June 2022

30 June 2022

Businesses with aggregated annual turnover between $50 million and $500 million can still deduct the full cost of eligible second-hand assets costing less than $150,000 that are purchased by 31 December 2020 under the existing instant asset write-off. Under the Budget measure, those eligible businesses that hold assets eligible for the $150,000 instant asset write-off will have an extra six months until 30 June 2021, to first use or install those assets.

Small businesses (with aggregated annual turnover of less than $10 million) can deduct the balance of their simplified depreciation pool at the end of the income year until 30 June 2022. The provisions which prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended.

 

 

For more information, please contact your local RDO Equipment branch:

RDO Equipment


Adelaide  

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Albury  

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Melbourne  

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Sydney  

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Townsville  

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Emerald  

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Mackay  

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Roma  

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Toowoomba  

21 Carrington Road, Toowoomba QLD 4350   |   07 4631 4800