The coronavirus economic stimulus plan for SMEs explained
Small businesses all around the world are facing uncertain times. However, rather than shutting up shop until COVID-19 passes, the federal government is hoping to stimulate SME spending through a raft of initiatives and tax incentives.
Indeed, the government estimates its two new business investment initiatives have the capacity to support more than 99% of businesses across Australia (3.5 million SMEs).
Basically, it’s hoping these measures will encourage SME owners to “stick with investments they had planned, and encourage them to bring investment forward to support economic growth over the short term”.
Let’s take a look at what they involve.
Instant asset write-off threshold increase
The instant asset write-off threshold has been increased from $30,000 to $150,000 (ex GST) and can now be accessed by businesses with an annual turnover of up to $500 million (up from $50 million) until June 30 2020.
Assets that may be able to be immediately written off include a concrete tank for a builder, a tractor for a farming business, or a truck for a delivery business, for example.
Now, it’s important to keep in mind that “write-off” doesn’t mean “free asset”.
Basically, this initiative allows you to immediately claim all the tax deductions you would have claimed over the life of the asset.
This can help with your business’s cash flow, as getting this cash back sooner means you can re-inject it straight back into other parts of your business.
Accelerated depreciation deduction
The other big initiative in the federal government’s plan to support SMEs is accelerated depreciation.
Basically, businesses will be able to immediately deduct 50% of the asset cost in the year of purchase and then also depreciate the remaining 50% over the asset’s useful life, so long as the business has a turnover of less than $500 million.
This initiative will provide businesses with a 15-month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions.
Sound a little confusing? The good news is that the Business.gov.au website has two great case studies that explain exactly how this initiative works in more detail.
Get in touch today
If you’d like to find out more about the instant asset write-off or the accelerated depreciation deduction, and how they might work with an asset purchase for your business, get in touch today. We’d love to help out any way we can.
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