Treasurer Josh Frydenberg has announced that the government is extending the changes made to the instant asset write-off scheme for a further six months. It will now end December 31, 2020.
Come January 1 the write-off scheme will revert back to $1,000 for SME’s with an aggregated annual turnover of less than $10 million.
The increase to the instant asset write-off scheme was designed to boost cash flow, and originally due to finish June 30, 2020.
The expansion allowed for businesses to claim assets valued at up to $150,000 with an aggregated annual turnover of $500 million.
Assets can be new or second hand and under the new scheme, must be used or installed by December 31.
“We do know that there are businesses that are ready to invest right now,” Mr Frydenberg said.
“When the restrictions are eased and people are back at work, our cafes and restaurants will be busy.
“Our hotels will have occupants again and our businesses will be able to export and import again, and they need the equipment and they need the machinery.”
The extension is expected to cost the government $300 million in revenue over the next four budget years.
It is estimated that 3.5 million businesses are eligible to take advantage of the increased instant asset write-off scheme.
“(They) will be able to go and purchase equipment or machinery, tools, up to a value of $150,000 – as many times as they want – and then write it off,” Mr Frydenberg told the media just outside of Canberra.
“We’ve been through some difficult times but the nation has made great progress.
“We’ve flattened the curve and people are getting back to work, and we want businesses to get back to doing what they do best – growing, innovating and hiring people across the economy.”
Without the current scheme in place, business would have had to deduct the depreciation of their assets over several tax returns.
Under the amended expansion, businesses will be able to deduct the cost of purchases up to $150,000 from the amount of tax they must pay in the financial year that the asset is purchased.
Aside from giving businesses more time to claim the write-off, the government says that the extension will be beneficial to those who have been affected by supply chain delays caused by COVID-19.
News of the extension has come at an opportune time as new car sales increased in May after the slump the industry experienced in April.
The $150,000 instant asset write-off scheme is believed to be one of the driving forces in Australian new-car sales during the COVID-19 lockdown period.
As a result of this, Ford has increased production of the Ranger ute at their plant in Thailand to cope with a sales surge in May.
Despite the ongoing decline in car sales, especially since the COVID-19 pandemic has broken out, the new car market is showing signs of recovery.