In Tuesday’s Federal Budget, Treasurer Jim Chalmers reinstated Instant Asset Write-Off for eligible asset purchases up to $20,000, and also announced a separate Small Business Energy Incentive to help small‑and medium‑sized businesses to invest in their energy transformation. With the inclusion of Temporary Full Expensing, there are now three separate investment allowances on offer, but whether you can take advantage of one or any will depend on the size of your business, the asset you’re investing in and its effective installation date.
Temporary Full Expensing is a COVID-relief and stimulus measure introduced by the previous government, which will expire on June 30th this year. Since its introduction, businesses with turnover of up to $5 Billion have been able to fully expense virtually all income-producing business assets up to any value. It has been heavily utilised by businesses to upgrade and invest in new equipment, particularly in transport, manufacturing and mining, but many incentive-based orders are still awaiting delivery due to supply-chain delays, and businesses taking delivery after June 30th won’t get the benefit they had factored in to the initial purchase. From July 1st onwards, normal depreciation treatment will apply, with the exception of assets eligible for Instant Asset Write Off or the Small Business Energy Incentive as set out below.
The availability of Temporary Full Expensing has masked the fact the previous $150K Instant Asset Write-Off actually expired on June 30th last year and wasn’t reinstated in either the May or October Budgets in 2022. This week’s Budget does reinstate Instant Asset Write-Off from July 1st, but only for assets up to a (nett of GST) value of $20K. Industry bodies such as CAFBA had argued for an extension of Temporary Full Expensing for businesses that could demonstrate an existing equipment order as at Budget Night, and a minimum of $100K asset value for Instant Asset Write-Off, so the $20K allowance goes only part way towards what business and industry was seeking.
Unfortunately the $20K threshold also won’t cover the cost of most vehicles or business assets, but it can be claimed more than once if you are purchasing several eligible assets. Eligible taxpayers are those with an aggregate turnover of up to $5 million, so it is very much a “small business” incentive. If the asset cost exceeds $20K, then normal depreciation treatment will apply to the full asset value – there is no partial offset. The 2023 Instant Asset Write off is in place until 30 June 2024, but historically most instant asset write-off schemes have been extended for a year at a time at each May Budget.
The Small Business Energy Incentive is a new scheme and will provide businesses with an annual turnover of less than $50 million with an additional 20 per cent deduction on spending that supports electrification and more efficient use of energy. It will help small businesses make investments like electrifying their heating and cooling systems, upgrading to more efficient fridges and induction cooktops, and installing batteries and heat pumps. Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business. Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024. It excludes assets that use fossil fuels, so while some forecourt assets utilised by ACAPMA members may be ineligible, other convenience outlet and workshop assets should qualify . Other exclusions include:
- electric vehicles;
- renewable electricity generation assets;
- capital works; and
- assets that are not connected to the electricity grid and use fossil fuels.
Clearly the best incentive is the existing Temporary Full Expensing, but June 30th is fast approaching so businesses need to act now to get the benefit of a scheme that will likely never be repeated.
Whenever a major tax incentive ends at end of financial year, banks and financiers are flooded with pre-June 30 settlement requests. In past years, finance settlements have needed to be documented and lodged by around June 15, so the window of opportunity is actually closer than it looks. ACAPMA members have the benefit of a bespoke finance offering from Quantum Business Finance, which can be accessed on our webpage, or follow the link here. Regardless of your business size or individual requirements, Quantum Business Finance can offer ACAPMA members a broader range of options and a strategic approach to overall debt requirements.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice.