Instant write-offs to get cash flowing

About 3.4m small to medium-sized businesses will be able to instantly write off work-related assets worth less than $30,000.

The government said more than 350,000 businesses had taken advantage of the instant asset write-off policy.

About 3.4 million small to medium­-sized businesses will be able to instantly write off work-related­ assets such as vehicles and tools worth less than $30,000.

Josh Frydenberg said businesses with up to $50 million annual turnover would be able to write off multiple assets, leading to immed­iately lower taxable incomes, rather than relying on depreciation over the lifetime of the purchase.

The policy is designed to improv­e cash flows for business and increase business activity and investment.

The move will cost the government about $400m over the budget forward estimates and will be phased out on June 30 next year.

The Treasurer yesterday raised the annual turnover threshold for eligibility from $10m to $50m, a move which will enable an extra 22,000 businesses employing 1.7 million workers to access the insta­nt asset write-off policy.

The chief advantage of the instant­ write-off scheme is that it provides an immediate tax benefit rather than business owners having­ to wait for the benefit to be delivered over multiple years.

The government said more than 350,000 businesses had taken advantage of the instant asset write-off policy.

Mr Frydenberg said the scheme could be used to provide new tools or vehicles.

“It will be increased from $25,000 to $30,000 and it can be used every time an asset under that amount is purchased,” he said, “allowing a cafe to get a new fridge or grill, a plumber to buy new tools or a courier a new van.

“The instant asset write-off will also be expanded to businesses with a turnover of up to $50m. This will cover an additional 22,000 businesses, employing 1.7 million Australians.”

Eligible businesses will be able to immediately deduct purchases of less than $30,000 that are first used, or installed ready for use, from last night to June 30 next year.

Treasury officials were unable to give individual examples of what the policy might mean in dollar­ terms to business.

On January 29, the government announced it would increase the instant asset write-off threshold from $20,000 to $25,000 and extend the scheme until the middle­ of next year.

The widening of the asset write-off policy comes as the governme­nt tries to shore up its voting base and help breathe life into the patchy economy.

The government has warned of potential economic headwinds and is also eager to appeal to a traditio­nally core constituency.

While the numbers of eligible businesses have not widened dramatical­ly, those businesses that do qualify can spend relatively big and expand their productivity.

Mr Frydenberg said the asset write-off policy was part of a broader agenda by the government to protect the economy.

“Australia does face some serious challenges,” the Treasurer said. “The global economy is slowing, communities are feeling the impacts of flood, fire and drought. Families face cost-of-living pressures and every one of us wants to see wages growing faster.

“But let me be clear: the answer to these challenges is not higher taxes. The answer is a stronger and more competitive economy, with lower taxes and more jobs. This budget builds on our plan for a stronger economy.”

The government will use the asset write-off policy as a key plank of its election pitch to the private sector.