Budget 2022: ALP draws line under instant asset write-offs

Unlimited instant asset write-offs will wind up from July 2023 in a blow to small-to-medium sized businesses.

Small Business Minister Julie Collins said the government would provide $62.6m over three years for an energy savings grant program. Picture: NCA NewsWire / Dan Peled

Unlimited instant asset write-offs will wind up from July 2023 in a blow to small-to-medium sized businesses.

As Jim Chalmers warned of a looming economic storm, the government’s first budget revealed the pandemic-era initiatives to support business investment would not be extended.

Temporary full expensing was one of several measures introduced during the Covid-19 pandemic, enabling businesses with a turnover under $5bn to immediately deduct the full value of new depreciating assets, rather than spread it out over the life of the asset.

Despite calls from the small business sector to extend the program in perpetuity – or until 2026 at a minimum to provide businesses with certainty – the government said TFE would be wound up from June 30 next year, arguing demand for the program had fallen well short of expectations. The legislation will return to its original form from 2016, with small businesses with a turnover up to $10m limited to writing off assets worth up to $1000.

In analysis of the previous ­government’s write-off regime’s impact on tax receipts, Treasury officials concluded the uptake of these programs had been “significantly lower than originally predicted”, particularly among large businesses.

The lower-than-anticipated uptake had resulted in a temporary increase in company tax receipts. The previous extension of the measure in 2021-22 federal budget was forecast to cost the budget $17.9bn in tax receipts over the forward estimates, but only $3.4bn over the medium term as future asset write-offs were brought forward.

The cull comes amid stiffening economic headwinds, as Ukrainian conflict fuels soaring energy prices and central banks run the risk of inducing a global recession as they attempt to douse inflationary pressures.

Treasury predicted the finalisation of the asset-write off ­program would lead to an increase in imports in the short-term as businesses rushed to purchase capital assets.

Small Business Minister Julie Collins said the government would provide $62.6m over three years for an energy savings grant program, helping SMEs to upgrade old and inefficient equipment that would reduce energy use and costs while also combating global warming.

Part of the funding would be funnelled from existing departmental resourcing.

“The government wants to help improve the long-term resilience of Australia’s small businesses and help them bounce back following significant challenges in recent years,” Ms Collins said.

The pre-announced $15.1m in funding for free mental health and financial counselling services for small business owners has been set aside in the Albanese government’s first budget. The government has also moved to outlaw unfair contract terms, which Ms Collins said would make it easier for SMEs to access government procurement contracts.

Outside of already announced measures there were measures to tackle the acute skills shortages confronting the nation.

These included $42.2m to accelerate visa processing, and resolve the visa backlog.

While the government reiterated that the permanent migration cap would be lifted to 195,000 in 2022-23, it did not provide a forecast over the forward estimates.

Migration reform was primarily fixated on the medium-to-long term, with funding for 20,000 ­additional university places provided across 2023 and 2024.

The places would be aimed at areas of skills shortages such as nursing, teaching, engineering and technology.

This was in addition to the $1bn National Skills Agreement to deliver 480,000 fee-free TAFE and community-based vocational education programs.

The program will be a joint delivery between the federal, state and territory governments.

As flagged by Skills Minister Brendan O’Connor, the Morrison government’s $2.8bn pledge to subsidise apprentice wages was also scrapped. In the face of rising inflation, Treasury forecasts predicted real wages would start growing again in 2024.