A recent report from ScotPac reveals that a significant portion of Australian SMEs, approximately 63%, took advantage of the uncapped Instant Asset Write-Off (IAWO) Scheme in the last financial year. This surge in usage comes as the federal government prepares to introduce new limits to the scheme.
The IAWO scheme, introduced over a decade ago, allows eligible businesses to claim an immediate tax deduction for asset purchases up to a specified threshold. In response to COVID-19 challenges, the government temporarily raised the threshold to $150,000, effectively eliminating the cap through temporary full expensing.
However, with the announcement of a new threshold of $20,000 per asset starting July 1, 2023, SMEs rushed to utilise the scheme before the change. The report highlights that SMEs experiencing stagnant or declining growth were the primary users, with 68% making eligible asset purchases, compared to 59% of growing SMEs.
Regional disparities were also observed, with 75% of SMEs in New South Wales and the Australian Capital Territory leveraging the scheme, compared to 54% in Western Australia.
ScotPac CEO Jon Sutton emphasised the scheme’s effectiveness in encouraging SME investment in assets for business growth. Despite changes to the threshold, Sutton noted that the current IAWO scheme continues to incentivize SMEs to invest in capital.
Average capital expenditure levels are rising among SMEs, with many leveraging asset finance and other working capital solutions to maximise available tax concessions.
As SMEs navigate changing thresholds and tax incentives, the Instant Asset Write-Off Scheme remains a valuable tool for driving business investment and growth.
