Less than two months after announcing it was increasing and extending the tax rebate on small business asset purchases, doubts are growing about whether the federal government has time to make its pledge legal.
A new $25,000 instant depreciation write-off threshold for small businesses turning over less than $10 million a year was meant to apply from the date of the government's January announcement until June 30 next year.
Prime Minister, Scott Morrison, pledged to lift the instant asset write-off on new gear from a maximum of $20,000 to $25,000 for the 18 months from January 29.
The government intended legislating the change when federal parliament resumed in February.
The proposed new Bill was introduced to the House of Representatives on February 13, but is still to be passed by both the lower house and the Senate and to receive Royal assent.
Tight deadline looms
It now risks remaining in limbo for months because just two April sitting dates remain before parliament is dissolved prior to a May federal election.
The current $20,000 asset write-off threshold, due to expire on June 30, began four years ago as a temporary measure, partly to stimulate small business investment activity.
It replaced a $1000 annual asset write-down over an extended three- or four-year period.
Rural accountants and farm equipment retailers confirmed the instant write-off initiative had indeed triggered a burst of farmer spending on everything from quad bikes to office equipment, trailers and welding gear.
However, with the write-off becoming something of an annual Budget night "carrot" for farmers and other small businesses, having been extended in 2017 and 2018, and potentially in 2019, farmers and accountants now felt it would make sense to be permanent.
You do question why this should not become a permanent feature of small business tax concessions
"It's been a real positive for small business," said RSM Australia director with the tax and consulting firm's Albury office, Jason Croker.
"Farmers and other businesses have been motivated to make investment decisions they might otherwise have postponed, and equipment retailers have benefitted from extra cash flow.
Why not permanent?
"You do question, however, why this should not become a permanent feature of small business tax concessions to avoid all this fuss each year."
He noted if parliament ran out of time to vote on the asset write-off extension before the federal poll because of the huge number of outstanding Bills awaiting parliamentary debate and voting, there would be no rise to a $25,000 threshold.
And worse, the current $20,000 depreciation deal would revert to $1000 on July 1.
"Fortunately the legislation has bipartisan support within parliament, so I'm not worried about a long debate or any opposition to the Bill," he said.
However, concerns still abound about whether the Prime Minister's fast-tracked legislation may end up bogged, waiting in the wings right up to the June 30 deadline, or later, if a potential change of government occured in May-June.
Meanwhile, if it wins government, Labor has also proposed an Australian Investment Guarantee, which would allow businesses to immediately deduct 20pc of any new eligible asset worth more than $20,000.
Certainty would help
National Farmers Federation's economics and trade general manager, Dr Pru Gordon, said farmers, like all small businesses, needed certainty.
"To maximise the benefits of this tax measure, the NFF is calling for the arrangement to be extended in perpetuity," she said.
Knowing this tax benefit was permanently available would provide the certainty needed to continue to invest
The farm sector had warmly welcomed the Coalition's $20,000 instant asset write-off when it was first announced in 2015 and each continuation since then.
NFF also welcomed Mr Morrison's decision to lift the threshold to $25,000 in January.
"These write-offs have allowed farmers to invest in new machinery and equipment and to make productivity-improving upgrades to their farm businesses," she said.
"Knowing this tax benefit was permanently available would provide the certainty needed to continue to invest."
Farm tax bills to shrink
Meanwhile, RSM's Mr Croker said the tough season meant "not everyone will even be paying tax this year".
While the advantages offered by the instant write-off were tax attractive, we always advise clients only to buy extra gear because it adds value to the business, not because it has tax benefits," he said.
Reducing your tax bill is less likely to be an issue for many people to be concerned about
"The tough season means not everyone will even be paying tax this year.
"Unfortunately, farm profitability levels this financial year generally aren't going as well as they have been in recent years.
"Reducing your tax bill is less likely to be an issue for many people to be concerned about."
Taxpayers were also reminded that to claim any instant asset write-off, they must run a business with an aggregated turnover of less than $10m and be acquiring the depreciating asset for business use.
Capital works such as building extensions or structural improvements or electrical installations did not qualify.
Farmers should also be mindful the instant asset write-off was merely an acceleration of the time frame during which small businesses could claim eligible deductions.
There was no extra deduction available.
Likewise, there was no extra cash available for the proposed $25,000 write-off, so eligible businesses should consider cash flow issues.
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