Half of SMEs that know about the newly enlarged $150,000 instant asset write-off plan to leverage it, yet a staggering one-third of small businesses don’t know about this $150,000 tax break.
Recent research by OnDeck Australia has confirmed that over one-third of the nation’s small and medium enterprises (SMEs) could be missing out on the tax savings of the newly enlarged instant asset write-off – simply because they are unaware of it.
In March 2020, the Morrison Government raised the limit of the instant asset write-off from $30,000 to $150,000, and expanded eligibility to include businesses with annual turnover below $500 million, up from $50 million previously. Further, on 9 June 2020, Federal Treasurer Josh Frydenberg announced that the scheme will be extended until the end of the calendar year 2020, meaning businesses can benefit until 31 December 2020.
However, an OnDeck survey found 35% of SMEs say they are not familiar with the instant asset write-off.
Robbie Fidler, National Broker Channel Manager, OnDeck Australia, says, “This write-off is available to 3.5 million Australian businesses. So it is a concern that over one million enterprises could miss out on the opportunity to save on tax today while investing for tomorrow’s growth, because they are unaware of the write-off.”
A potential tax saving of $41,250
Close to half (46%) of SMEs that are aware of the instant asset write-off say they are likely to take advantage of it. And it can deliver valuable tax savings. Based on the small business tax rate of 27.5%, an incorporated business making full use of the $150,000 instant asset write-off in this tax year could trim a massive $41,250 from its 2019/20 tax bill.
Along with tax savings, the instant write-off allows SMEs to invest in assets that can improve productivity. Close to half these SMEs (46%) plan to use the tax break to invest in IT equipment, vehicles (46%), manufacturing equipment and machinery (19%) and office furniture (15%).
Finance is required to access the asset write-off
Two out of five (41%) SMEs say an online small business loan would be helpful to take advantage of the instant asset write-off.
Robbie Fidler points out, “Preserving cashflow is always a priority for the SME community, so it makes sense for small businesses to use loan finance to fund business assets.
“However, time is of the essence. In order to claim the newly enlarged instant asset write-off, the asset needs to be in place and ready to use by 31 December 2020. This makes it important for SMEs to contact their broker – or dedicated SME lenders like OnDeck, for help arranging finance to take advantage of the $150,000 instant asset write off, which is slated to reduce back to $30,000 from 1 January 2021.
OnDeck’s research confirms that among SMEs that have successfully applied for bank finance in the past, one in four have been negatively impacted by the time taken to secure finance. As a fintech lender, OnDeck has a fast application process backed by rapid approval times.
“SMEs can complete much of our application process online, often with funds available in as little as one working day,” concluded Robbie.
 The Australian Taxation Office has indicated that the instant asset write-off for passenger cars is limited to the business portion of the car limit of $57,581 for the 2019–20 income tax year. The excess cost of the car cannot be claimed under any other depreciation rules. https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/Simpler-depreciation-for-small-business/Instant-asset-write-off/
Prepared by OnDeck Capital Australia Pty Ltd ABN 28 603 753 215 (“OnDeck”) for general information purposes only. Content may belong to or have originated from third parties and OnDeck takes no responsibility for the accuracy, validity, reliability or completeness of any information. Information current as at 20 May 2020. You should not rely upon the material or information as a basis for making any business, financial or any other decisions. Loans issued in Australia are subject to the terms of a loan agreement issued by OnDeck. Loans are subject to lender approval. OnDeck® is a Registered Trademark. All rights reserved.