Budget 2024: What SMEs need to know about the $20,000 instant asset write-off extension

The headline small business measure in the 2024-25 federal budget is a 12-month extension to the $20,000 instant asset write-off, which if legislated, will help SMEs claim an immediate tax benefit on new assets through to June 2025. 

However, a question mark remains over the measure, as the federal government is still yet to successfully legislate a similar 12-month extension that was included in last year’s budget. 

The government has used this year’s budget to tout the cash flow benefits and reduced compliance of the measure, but it must pass legislation by June this year to allow SMEs to benefit from the measure in the 2023-24 financial year. 

So how will the latest iteration of the write-off work?

Here’s what SMEs need to know. 

Who can access the new scheme?

The instant asset write-off scheme will remain available to Australian businesses with annual turnover of less than $10 million, according to the budget papers. 

However, the federal opposition has previously successfully passed amendments to the current legislation for the write-off to be extended for 2023-24, with an increased asset threshold of $30,000. The same amendment would increase the turnover threshold to $50 million.  

The current level differs substantially from the Covid-era Temporary Full Expensing measure, which was introduced in 2020 and made available to all Australian businesses with up to $5 billion in annual turnover. 

How does the instant asset write-off help my business?

The proposed instant asset write-off scheme will operate in similar ways to previous iterations (the policy itself was first introduced in 2015 by the Coalition). 

Eligible small businesses will be able to claim an immediate tax deduction for the full value of a purchased asset, instead of claiming the depreciation over several years. 

The scheme will cover eligible purchases up to the value of $20,000, which is the same level that was in place in 2015.

To be eligible, assets will need to be used or installed ready for use by June 30, 2025. 

When does the scheme start and finish?

This version of the instant asset write-off scheme will be in place from July 1, 2024, to June 30, 2025.

However, the same arrangements will also be available for assets purchased in the 2023-24 financial year, provided the government passes the relevant legislation before June 30, 2024. 

What assets are eligible under the scheme?

Businesses can claim the immediate deduction for all depreciable assets, provided they fall below the $20,000 threshold.

Importantly, SMEs can use the write-off on a per-asset basis, which means they can “instantly write off multiple assets”, according to the budget papers.

Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year, and 30% in each subsequent income year.

According to the budget papers, the latest 12-month extension of the write-off will cost the budget $290 million over the next five years. 

The instant asset write-off scheme always seems to be changing. What led to this point?

As mentioned, a $20,000 instant asset write-off for SMEs was first introduced by the Coalition in the 2015 federal budget.

Prior to this time, under the Gillard government, small businesses with annual turnover under $2 million could immediately write off expenses under $1000, instead of using standard depreciation schedules over several years.

The asset value increased to $6,500 in 2012 and 2013, which allowed businesses to claim an immediate tax deduction on larger items, such as cash registers or more significant tech upgrades.

The accelerated depreciation measure was wound back to the $1000 threshold by former Treasurer Joe Hockey in 2014 and the first half of 2015, before dramatically increasing to $20,000 in the May 2015 federal budget.

More small businesses gained access to the $20,000 write-off scheme from July 1, 2016, when the turnover threshold was lifted to $10 million.
The write-off asset limit then went through a series of increases between 2019 and 2020, to $30,000, before Covid-19 support measures saw it jump to $150,000. At that time, the turnover limit also increased substantially, to $500 million.

This was then trumped by the massive Temporary Full Expensing measure introduced by the Morrison government in October 2020, which allowed businesses with annual turnover under $5 billion to claim an immediate deduction of the full value of all new, eligible, depreciable assets of any value that are first used or installed before June 30, 2022.

Temporary Full Expensing stayed in place until June 30, 2023.