Small business groups call for asset write-off extension amid supply chain crunch

Small business groups are calling on the federal government to extend the temporary full expensing scheme ahead of the upcoming federal election, as ongoing supply chain issues push the cost of new purchases higher and delay shipping times.

The federal government introduced the temporary full expensing scheme in the last federal budget, allowing businesses with a turnover or income of less than $5 billion to immediately write-off the cost of assets they first use or install by June 30, 2023.

It was a significant expansion of the previous instant asset write-off scheme and allows for all eligible assets to be immediately written off, with no cap on the value of new assets that can be claimed.

Alexi Boyd, chief executive of the Council of Small Business Organisations Australia (COSBOA), tells SmartCompany the scheme has been a “real saving grace” for small businesses.

“Not only does it remove the complexity behind depreciating an item, it encourages small businesses to invest in their business for the future,” Boyd says.

But Boyd says supply chain issues, which have blown out delivery times and increased the cost of shipping by up to seven times, are now discouraging businesses from making the most of the scheme.

“There’s no point purchasing something if you can’t utilise it in your business for however many months, and that’s the problem with supply chain issues,” she says.

“What we’re hearing from businesses is that they will make an investment, and then the delivery date keeps getting pushed back and the costs associated with freight keep getting reevaluated.”

The federal government extended the scheme until June 2023, as part of the May 2021 budget, but no announcements have been made about extending it further.

“We’re calling on the government to extend it again and reevaluate making that extension not just one year, given supply chain issues, but actually making it a three-year extension,” Boyd says.

The temporary full expensing scheme is an expanded version of the previous instant asset write-off measure, which had a cap of $150,000 on the price of each asset.

Elinor Kasapidis, senior manager tax policy at CPA Australia, says businesses should start considering what asset purchases they might want to deduct against their income this financial year.

“We’re hearing a lot about supply chain issues so if a business wants to invest in assets and claim it in their 2022 tax return, they should definitely start thinking about ordering it now,” Kasapidis says.

“But it’s important for businesses to make sure that a business case exists for the purchase before they go rushing off and spending money,” she adds.