Businesses will be able to access the boosted $150,000 instant asset write-off scheme for a further six months to the end of the year, in a move Josh Frydenberg said would help to stimulate investment through the COVID-19 recovery.
As part of its emergency fiscal package, the government quintupled the value of assets businesses were able to instantly claim against their tax for the period of March 12 to June 30, and expanded the eligibility to cover firms with turnover of less than $500m, from $50m previously.
On Tuesday, the government will announce that the more than 3.5 million eligible businesses will now be given until December 31 to buy and use new investments and claim an instant write-off, whether that be a tractor for a farmer or a new or second-hand ute for a tradesman.
The Treasurer said the extension would give companies extra time to make use of the instant asset write-off scheme, and was “designed to support business sticking with investment they had planned, and encouraging them to bring investment forward to support economic growth over the near term”.
The threshold applies per asset, so eligible businesses can immediately write off multiple assets as long as they are bought and installed by the end of the year.
The latest available data from the Australian Taxation Office shows more than 360,000 small businesses benefited from instant asset write-offs in the 2017-18 financial year.
The government will need to legislate the change, at an estimated cost of $100m in the next financial year, and $600m in 2021-22, before recouping $400m in 2023-24 for a total cost of $300m over the forward estimates period.
That will push the total cost of the expanded instant asset write-off measure to $1bn.
The announcement follows last week’s $688m HomeBuilder program, which offers $25,000 cash grants to eligible new home builds and major renovations in a bid to stimulate the construction sector over coming months.
Treasury secretary Steven Kennedy has said a pick-up in housing and business investment would be a key gauge of whether the economy was recovering from its COVID-19 induced slump.
“Consumption will come back, partly because people have been stopped consuming some activities, so that’s naturally going to come back,” he told a Senate committee last month.
“But we’ll be more confident about recovery when we see business investment and housing investment because, at that point, we’ll know people are more confident about the future.”
On Monday, the government also revealed that it would end free childcare from July 13, and announced a transition package for the sector.