Budget 2015: SMEs to write-off every asset purchase under $20,000

As of 7.30pm this evening, Australian small businesses with turnover below $2 million will be able to immediately deduct every asset they purchase valued up to $20,000.

While SMEs were expecting the budget to include an accelerated depreciation package with an annual threshold of $10,000, Prime Minister Tony Abbott, Treasurer Joe Hockey and Small Business Minister Bruce Billson said in a joint statement the government will instead extend the threshold for asset deductions from $1000 to $20,000.

The new threshold will be in place until the end of June 2017 and is designed to support small businesses to invest in new assets to grow their businesses.

The $20,000 threshold applies to each individual asset and small businesses will be able to apply the $20,000 rule to as many individual assets as they want.

Most small capital purchases will be eligible for the new threshold, with the exception of assets that have specific depreciation rules, including in-house software and horticultural plants.

Assets above the $20,000 threshold can be added together in the existing simplified depreciation pool and depreciated at the same rate: 15% in the first income year and 30% thereafter.

If the value of the asset “pool” is less than $20,000, it can be immediately deducted until the end of June 2017.

The government will also suspend current “lock out” rules for the simplified depreciation rules until June 30, 2017. The rules currently prevent small businesses from re-entering the simplified depreciation regime for five years if they have opted out.

The budget papers estimate the changes will cost $1.8 billion over the forward estimates.

The threshold is part of the government’s $5.5 billion “Growing Jobs and Small Business” package, which Abbott, Hockey and Billson described as “the biggest small business initiative in our nation’s history”.

“The government is committed to ensuring Australia is the very best place to start and grow a small business,” they said.

“Small businesses are the engine room of our economy. In 2013-14 there were over 280,000 new small businesses started in Australia.”

“96% of all Australia’s businesses are small business, employing over 4.5 million people and producing over $330 billion of nation’s total economic output.”

“As our economy changes, the role of our small businesses will be even more important. With the economy in transition we are freeing up small business to create new jobs.”

Measures that allow small businesses to accelerate depreciation of asset purchases are supported by the Council of Small Business of Australia and the Australian Greens, which said in April it would support Prime Minister Tony Abbott’s proposed small business tax cut if the Coalition also reinstated two small business measures it scrapped when it did away with the mining tax.

Greens Senator and small business spokesperson Peter Whish-Wilson said at the time his party will “provide the pathway through the Senate” if the federal government uses the budget to “undo” the damage it did to small businesses by scrapping the loss carry-back scheme and slashing the instant asset write-off in 2014.

Ultimately, the Greens want to see the Abbott government “shift the burden from small business to big business, said former Greens leader Christine Milne in a statement at the time.

“The Greens are open to a two-tiered company tax system if the Abbott government is willing to help shift the burden from small business to big business,” Milne said.

“We have to shift the burden and raise revenue from those who can afford it – the big end of town.”