Independent crossbencher Senator David Pocock is urging the government to “do more” to support small businesses in a tough economic climate, as early signs point to yet another parliamentary showdown over the instant asset write-off scheme.
Similarly, Coalition senators are also pushing for the small business tax break to be expanded beyond the government’s latest proposal.
As announced in the 2024-2025 federal budget, the Labor government is proposing a $20,000 limit for the instant asset write-off (IAWO) for the current financial year, allowing businesses with annual turnovers below $10 million to depreciate the full value of eligible business upgrades instantly.
The $20,000 limit mirrors the tax break covering the 2023-2024 financial year.
However, a parliamentary stoush between the government and the Opposition — which initially advocated for a $30,000 asset limit and expanded turnover thresholds — saw the $20,000 IAWO policy pass into law just before the end of the last financial year.
If the measure didn’t pass, the policy would have reverted to its fallback threshold of $1,000, severely limiting its usefulness to small businesses.
Legislation to extend the $20,000 write-off plan for 2024-2025 is now before the Senate, as part of the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024.
In an Economics Legislation Committee report on the bill, handed down last week, Labor senators and Greens Senator Nick McKim recommended the bill be passed with the $20,000 limit intact.
However, Coalition senators on the committee argued it should be permanently lifted to $30,000 — the same limit the Opposition ultimately relented on last financial year.
“This would simplify depreciation for millions of small businesses by cutting red tape, boosting investment in productive assets and lowering business costs and prices,” wrote Liberal Party Senators Andrew Bragg and Dean Smith.
“It would provide small businesses with regulatory certainty and, importantly, would ensure the government can’t leave extending the IAWO until the last minute, as it did for the 2023-24 financial year.”
Support for an expanded IAWO does not only come from the Opposition, with crossbencher Senator Pocock also advocating for an expanded and permanent write-off policy.
Speaking exclusively to SmartCompany, Pocock said on Tuesday the actions of the major parties on this issue don’t match their words.
“We hear a lot from the major parties about supporting small business but I haven’t seen this reflected in legislation and budgets,” he said.
“The instant asset write-off is increased temporarily every year and hasn’t been at its paid legislated rate since 2012, creating unnecessary uncertainty for small businesses.”
“The last-minute passage of the extension for the past two years has created further uncertainty for small businesses and prevented them from taking full advantage of it.
Pocock said the government must act, now.
“Conditions are extremely tough for small business and I urge the government to do more to make it easier for a sector that is so vital to our economy and to jobs across the country,” he added.
Separately, the Greens have voiced their support for a larger IAWO threshold and longer coverage period; Senator McKim last year said it ought to operate in three-year blocks.
The government could face a major obstacle when trying to pass the 2024-2025 instant asset write-off scheme if the supporters of a longer and larger IAWO can find common ground in the Senate.
This could be further complicated by proposed reforms to the buy now, pay later sectors, which comprise the bulk of the bill in which the new IAWO provisions are contained.
If a parliamentary stoush emerges over those changes, small businesses could expect another anxious wait to know if they can use the $20,000 tax break.
For its part, Labor says year-by-year changes to the IAWO limit, as seen in the latest federal budget, allow the government of the day to respond to contemporaneous economic challenges.
Minister for Small Business Julie Collins has defended the $20,000 limit in both the 2023-2024 and 2024-2025 financial years, calling it a carefully calibrated support measure for small businesses that will not stoke excess inflation.
Treasurer Jim Chalmers also levelled blame for the 2023-2024 scheme’s late passage on the Opposition.
“The only thing standing between small businesses and cashflow support this financial year is the grandstanding and delaying tactics of the Opposition,” the Treasurer told SmartCompany in May.
“The Opposition has once again shown its nasty negativity is no substitute for economic credibility,” he added.
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Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
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