Tradies and small business score handful of tax wins

Energy incentives, an amnesty on filing late tax returns and how to claim deductions for a new ute have changed. Here’s what SMEs need to know.

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Tradies will still be able to claim a tax deduction for a new ute under a pared back asset write-off scheme aimed at keeping small business spending.

The rejigged asset write-off scheme allows small businesses with a turnover up to $10m a year to write off the cost of new equipment under a two-tiered system expected to cost the taxpayer $290m over the next five years.

Small businesses can write off the full cost of assets worth up to $20,000 against their tax bill for the year, or book an accelerated depreciation schedule for the equipment to write the cost off over several years.

Alicia Mora-Hyde owner of Moro-Igra umbrellas in her small warehouse factory in the outer Brisbane suburb of Brendale. Picture: Lyndon Mechielsen/The Australian

Equipment that costs more than $20,000 can be placed into a depreciation pool, which ­allows small businesses to immediately write off 15 per cent of the cost and a further 30 per cent each year after.

The change takes the asset write-off scheme near to its 2019 levels and above the $1000 default version of the instant asset write off scheme, which was set to kick in after the current uncapped scheme expires at the end of June.

In addition, the government will roll out an energy incentive scheme for businesses with a turnover up to $50m, offering an additional 20 per cent tax discount on assets and equipment that are more energy efficient or support electrification.

The scheme will offer up to $20,000 bonus tax deductions for expenditure up to $100,000.

New fridges, heat pumps, electric heating or cooling systems, batteries and thermal ­energy storage systems will be eligible. However, it will not be extended to cover electric vehicles, solar panels or renewable electricity generation assets, capital works, or assets that are not connected to the electricity grid and use fossil fuels.

The budget also contains funding to trial an independent review for small businesses in disputes with the tax office, as well as removing duplication of paperwork for single-touch payroll lodgments, by allowing employers to provide tax agents with the authority to act on their behalf.

Small businesses that have failed to lodge their tax returns will also be encouraged to so under an amnesty program ­expected to raise $275.4m. Businesses with a turnover of less than $10m will be offered an ­amnesty on penalties for outstanding tax statements covering the period between December 2019 and February 2022.

Judo Bank chief economist Warren Hogan said small businesses were facing labour shortages and cost blowouts and lacked the scale to deal with it.

“Although, the overall business conditions in Australia are pretty damn good, the economy has slowed a bit,” he said. “I do worry what is going to happen if we do get the inevitable rough patch.”

Mr Hogan said small and medium business would have to bear the brunt of the slowdown, but noted it “would not be uniform”. “You will see some parts in certain industries really struggle,” he said.

Mr Hogan said it was “really good” the government had kept an asset write off at $20,000.

“It is going to give the economy a bit of a buffer,” he said.

“For business, it will encourage them to keep spending.”