“Lean ships”: Cash-strapped small businesses plan to snub $30,000 instant asset write-off

A government move to increase the instant asset write-off threshold to $30,000 earlier this year was applauded by small business advocates, but as tax time approaches new research suggests many intend to snub the scheme.

Retailers, including Officeworks, Harvey Norman and others, have kicked off their EOFY advertising campaigns in recent weeks, targeting business owners with references to the asset write-off.

But releasing a survey of 1000 business owners in its target market yesterday, Officeworks revealed a whopping 84% don’t plan to take advantage of the write-off this year.

What’s more, less than half of those aware of the scheme actually intend to lodge a claim, amid concern small-business owners don’t have the capital to make full use of the program.

The findings echo results from an American Express report late last year, which similarly found about half of businesses aware they can instantly write-off an asset they’ve purchased saying they wouldn’t make a claim.

The instant asset write-off scheme enables businesses to instantly deduct the value of an asset worth less than $30,000 in the year of purchase, instead of claiming deductions over several years.

The federal government made the policy one of its key small-business talking points in the lead up to the election, budgeting at least $700 million for the April threshold extension from $25,000 to $30,000.

But while the focus in Canberra has been on increasing the cap and relaxing eligibility requirements, business owners SmartCompany has spoken to say they intend to make much smaller purchases.

David Pagotto, founder of digital marketing agency SIXGUN, says he’s in the market for computers and monitors.

“As a business operating in the IT and marketing sectors, we are using the instant asset write-off primarily in relation to staff equipment,” he tells SmartCompany.

He’s not alone. Officeworks found 56% of its respondents are after computers, followed by vehicles (33%), tools (23%) and office furniture (21%).

Small-business accountant Stacey Price of Healthy Business Finances says her clients are also making smaller purchases at the $500-2000 mark.

“That is all their cash can stretch to without putting themselves in debt,” Price tells SmartCompany.

“Small-business owners run a lean ship, a very lean ship, and they are getting far smarter with their money.

“If they do build up excess cash, they use it to build their business in other ways such as digital marketing, SEO, new stock, attending trade fairs — all of which are still tax deductions aimed directly at growing the business,” Price says.

The available figures on the instant asset write-off from the tax office reveal fewer than 350,00 businesses claimed something under the scheme in 2016-17.

The average amount claimed was just $11,000 of the $20,000 cap at the time, according to the ATO.

In deciding to increase the write-off threshold earlier this year, the government again rebuked calls for the scheme to be made permanent, instead leaving the cut-off at June 30, 2020.

Businesses looking to lodge write-off applications this tax time are advised to note important dates associated with their claims.

Changes to the scheme legislated in April mean businesses can claim assets “first installed or ready to use” between January 29 and April 2 — but only under the old $25,000 cap.

Assets purchased after April 2 (budget night) and before June 30 can be claimed under the $30,000 cap.