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Take-up of the instant asset write-off is unlikely to increase while business confidence remains low, despite the measure receiving two recent boosts, say tax experts.
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‘Overamplified’: Business confidence hampering write-off take-up
17 June 2019
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New data from the Tax Office shows that over 360,000 small businesses made an instant asset write-off claim in 2016–17, up from 300,000 in 2015–16.
The average amount claimed also rose to $11,000, up from $9,000.
However, fresh research has since showed that up to 84 per cent of small businesses surveyed were not taking advantage of the expanded $30,000 instant asset write-off.
Speaking to Accountants Daily, CPA general manager of external policy Paul Drum believes that more businesses would utilise the measure if they had confidence in the economy.
“CPA acknowledged that it was important as a fiscal stimulus measure, but certainly some in the public domain have overamplified the so-called greatness of the measure,” Mr Drum said.
“If you are not making money now, just because you get an earlier deduction, you don’t go and double down and get that extra equipment if the work’s not going to be there, and that’s about business confidence about if the work is going to be there.
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“From an investment perspective, a lot of businesses have their hands firmly in their pockets because they are uncertain about what’s going to happen in the future and that’s reflected in RBA statements and other economic metrics recently.”
Likewise, Nexia national director of tax David Montani believes businesses will not make an outlay just to get a tax incentive.
“A tax incentive is the wrong reason for a business to invest in an asset,” he said.
“A right reason for a business to invest in an asset is the judgement that you’re going to get a sufficient commercial return from that asset, and if you get an instant tax write-off, that’s just a bonus.
“What’s more effective is creating the environment in which businesses have the confidence to invest in new assets for the reason that they expect to get a sufficient return.”
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