Increase in instant asset write-off to improve small business cashflow not great for ag

Small businesses will have a bit of extra cash on hand after the Federal Government announced $290 million in support under its temporary increase to the instant asset write-off from July 1, 2023, to June 30, 2024.

The $20,000 instant asset write-off will affect up to 3.8 million small businesses nationwide with a turn over of less than $10 million, with improved cashflow and reduced compliance, according to the government.

It replaces the existing temporary full expensing scheme that ends on June 30, which applied to businesses with a turnover of up to $500m.

“The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets,” the Australian Tax Office stated.

“Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15 per cent in the first income year and 30 per cent each income year after that.”

While the Federal Government has touted the change as a win for small business the agriculture sector was not so supportive.

Fred Hopkins WA owner Gary Johnson said the temporary full expensing scheme was helpful for many larger operators in the agricultural sector, who will now be excluded from the government’s changes.

“The $20,000 instant asset write off is better than nothing, but it will exclude a lot of equipment,” Mr Johnson said.

“Customers have been taking advantage of the full expense scheme before June 30 — which was a win, win for business customers and suppliers, as well as the economy.”

He said being able to instantly write off smaller machinery items or vehicles would be good for the lower end of the market.

WAFarmers chief executive Trevor Whittington said the tax write-off, which was introduced by the previous Federal Government, had been diminishing each year because of inflation so it “should have been raised rather than celebrated as a small business tax concession”.

“Still better to keep it than lose it,” Mr Whittington said.

Pastoralists and Graziers Association of WA president Tony Seabrook said the accelerated write-off scheme provided a benefit for some people but there was always the longer five-year depreciation method which may be better depending on what the business was planning to do.

“It was a short-term thing to keep the economy ticking along,” Mr Seabrook said.

“It’s a shame that it’s reversing back to what it was.”

Agricultural machinery dealers said the change would more likely assist trades supporting the large-scale ag machinery sector than its clients or members.

Tractor and Machinery Association of Australia executive director Gary Northover said the change in the scheme was “effectively the end of it”, as it included only small businesses with an aggregated turnover of less than $10 million.

“It’s a return to business as usual,” Mr Northover said.

“As far as machinery buyers and dealers are concerned it doesn’t really help us.

“It’s more directed to the trades that support us and regional communities.”

Mr Northover said while they knew it was coming it would have been better if the government had reduced the support over a few years.

“We are not unreasonable about it,” he said.

“We’ve had a good couple of years and people have been preparing for it.”

He said with an El Nino predicted and financial uncertainty in the international market, there were possibly challenging times ahead for the industry.

“It would have been nice to see a tapering of the scheme in order to better manage any possible challenging times ahead,” Mr Northover said.