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Government announces enhanced tax concessions to support business capital investment

24 March, 2020

6R series

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 almostimmediately 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 placeclaiming 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.

Vanderfieldis 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.

For more information, please contact your local Vanderfield branch:


Biloela   

41 Dawson Highway, Biloela QLD 4715   |   07 4993 8500

 

Bundaberg   

19-23 Enterprise Street, Bundaberg West QLD 4670   |   07 4331 8500

 

Chinchilla   

39-45 Warrego Highway, Chinchilla QLD 4413   |   07 4570 3500

 

Darwin   

22 McKenzie Place, Yarrawonga NT 0830   |   08 7922 1830

 

Emerald  

46 Gregory Highway, Emerald QLD 4720   |   07 4843 8500

 

Gatton   

Market Drive, Gatton QLD 4343   |   07 5460 2500

 

Gympie   

Laurenceson Road, Glanmire QLD 4570   |   07 5480 6800

 

Mackay  

2276 Bruce Highway, Kuttabull QLD 4741   |   07 4966 3300

 

Roma   

137 Raglan Street, Roma QLD 4455   |   07 4678 8500

 

St. George    

Thallon Road, St. George QLD 4487   |   07 4570 9500

 

Toowoomba    

21 Carrington Road, Toowoomba QLD 4350   |   07 4631 4800

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