It is safe to say that the recently released 2017/18 Federal Budget was a winner for small regional businesses.
Thankfully, Scott Morrison’s latest budget will see an extension of the $20,000 immediate asset write-off provisions for small businesses (aggregate turnover <$10million) by 12 months to 30 June 2018 on the assumption that the extension is approved by both Houses of Parliament.
Under the extended provisions ‘small businesses’, including those in regional areas, are allowed to immediately deduct the cost of eligible assets, so long as that cost is less than $20,000, and provided that said assets are installed and in use by the 30 June 2018.
For depreciation purposes, what represents the assets ‘cost’ is important in determining whether a small business is able to access the immediate write-off measures and though the assessment criteria has not changed under the extended provision, it is still worth seeking independent tax advice to determine the appropriate application of the legislation.
Whilst an extension has been provided for the small business immediate asset write-off provisions, it is worth noting that no such extension has been granted for the specific accelerated depreciation concessions for primary producers, first implemented in the 2015/16 Federal Budget.
Previously, primary producers who met the definition of a small business entity were eligible to choose between the accelerated depreciation for primary producers’ method or the immediate write-off for small business provisions when depreciating an eligible asset – this will no longer be the case.
Primary producers who meet the definition of a ‘small business’ can still apply for the immediate asset write-off under the $20,000 immediate asset write off provisions, however, the specific accelerated depreciation allowances (for primary producers) for fencing, fodder storage and water facilities, previously available to many agribusinesses, will cease as at 30 June 2017.
Extending the immediate deductibility threshold for small businesses will most certainly help improve the cash flow position of many small businesses. It will also help smaller agribusinesses to invest in assets that will help them grow, undoubtedly having knock-on effects on the economies of regional communities. It is, therefore, important that businesses look to take advantage of such provisions as there is no certainty that they will continue beyond 2018.
Finally, with any change to the taxation landscape it is always worth reaching out to an independent tax professional to see how your business may be impacted.
By: James Massie-Taylor, Partner, BDO Perth
This story was first published in Leading Agriculture Issue 23.