Instant asset write-off deadline extended

The federal government has extended the Instant Asset Write-Off scheme to the end of this year.

Originally due to end on June 30, the expanded Instant Asset Write-Off scheme announced in March allows businesses making $500 million per year (previously $50m) being allowed to deduct the full cost of purchases worth up to $150,000 (previously $30K).

Treasurer Josh Frydenberg said the extension of the scheme will help businesses recover from the coronavirus crisis and stimulate the economy.

"We do know that there are businesses that are ready to invest right now," he said.

"When the restrictions are eased and people are back at work, our cafes and restaurants will be busy.

"Our hotels will have occupants again and our businesses will be able to export and import again, and they need the equipment and they need the machinery."

The government said the scheme's expansion is projected to cost $300 million over the next four budget years and that 3.5 million businesses would be able to benefit from the scheme.

"Hundreds of thousands of business have taken up the program in its previous format," Mr Frydenberg said.

"We will see that level of take-up once the end of the financial year arrives."

The move follows lobbying from a number of automotive industry bodies including the MTAA and VACC, which called upon government to extend the business tax break to September, so the new December 31 deadline will be icing on the cake for struggling car dealers.

“Many dealers may benefit from an announcement that the instant asset write-off has risen from $30k to $150k,” said the VACC in its submission in April. "It would be prudent that the instant asset write-off be extended until 30 September 2020 to allow businesses to recover and take advantage of areas for investment.

The tax concession favours the purchase of light commercial vehicles (LCV) with a one-tonne payload specifically intended for workhorse roles.

VFACTS figures from May indicate that the SUV and LCV sales were not as badly hit by the covid-19 lockdown as the passenger-car class, suggesting that the Instant Asset Write-Off had a part to play in bolstering sales in those respective classes.

While passenger-car sales last month were reduced to 13,836 for the month – down 15,054 (52.1 per cent) year on year – SUVs sales declined to 28,652 for the month – 12,285 lower (30 per cent down) year on year.

But it was LCVs that fared best. At 14,791 sales for the month, the LCV class was just 4387 sales lower than in May of 2019 – a 22.9 per cent slump, year on year. Pundits credit the Instant Asset Write-Off scheme for LCV sales remaining relatively high during the lock-down.