Our professional associations have lodged their pre-Budget submissions for the 2016-17 federal budget to the government. They have called for the retention of the $20,000 instant asset write-off for small businesses, among other measures.

The part-year Treasury figures indicate that the new $20,000 threshold is, to date, achieving its desired effect of encouraging small businesses to invest in necessary capital items by alleviating the cash flow burden that usually accompanies a long effective life.

Under the temporary $20,000 threshold rules, taxpayers are also currently able to deduct the entire balance of their general small business pool if that amount is less than $20,000 for an income year.

Under current law, this threshold will revert to $1,000 on 1st July 2017. It’s recommended to permanently maintain the $20,000 instant write-off threshold and also extend this to permanently retain $20,000 as the threshold for writing off low pool balances.

Stop the admin burden!!

Maintaining a $20,000 threshold for these related depreciation rules will mitigate the uncertainty and confusion that the small business community currently experiences. Up to 2012-13, the threshold was $1,000. Then, for a mere 18 months, the threshold was increased to $6,500. For a further period of less than 18 months, the threshold reverted to $1,000.

Finally, the threshold was significantly and generously increased to $20,000. But it will once again be $1,000 next year. This chopping and changing adds significantly to the administrative burden of small business operators.

No revenue impact

Also, it is thought that maintaining the $20,000 threshold permanently should have a negligible effect on total government revenues over time. Any reduction in tax payable in the year that a business claims the write-off is compensated for in subsequent years for which it will not claim depreciation on that asset.

Enrico De Pietro

DIRECTOR -OPTIMA PARTNERS