Budget 2022: Depreciation of intangible assets scrapped to save $550 million

The federal government has decided not to proceed with a previous Coalition policy that would have allowed business operators to self-assess intangible depreciating assets, such as patents, registered designs, copyrights and in-house software. 

Billed as one of the key innovation policies of the Morrison government ahead of the 2021 federal budget, the policy was part of a $1.2 billion package included in the previous government’s digital economy strategy. It was due to commence with assets acquired from July 1, 2023. 

The Coalition had earmaked $170 million towards the overhaul of tax treatment of intangible assets, across the 2023-24 and 2024-25 financial years.

However, the Labor government has instead opted to “maintain the status quo”. 

This means that the effective lives of intangible depreciating assets will continue to be set by statute, the government said in the budget papers on Tuesday. 

“This will avoid the potential integrity concerns with the previously announced measure and contribute to budget repair,” the government said. 

That contribution is estimated to be a budget saving of $550 million over four years, from 2022-23, with budget forecasts showing the Coalition’s policy would have cost some $380 million in 2025-26. 

Had the Coalition’s policy come into effect, taxpayers would have been able to self-assess the life of a depreciating intangible asset in the same way they do currently for tangible assets. 

In the lead up to the 2021 budget, former Prime Minister Scott Morrison highlighted the policy as a way of recognising that “every business is a digital business”. 

The policy was welcomed by members of the small business and tech communities, and had been a familiar request since the Coalition had introduced the $20,000 instant asset write-off scheme for phsycial assets back in 2015. 

Ian Yip, chief executive of cybersecurity software company Averto, told SmartCompany at the time that the intangible tax write-offs would be helpful to a business likes his, given most of the company’s assets are digital. 

“It will help our financial situation,” he said. “We’re still managing a tough time so any tax support that we can get will help”.