Two-thirds of SMEs used uncapped Instant Asset Write-Off Scheme:  Average spend exceeded $90,000

Two-thirds of SMEs used uncapped Instant Asset Write-Off Scheme: Average spend exceeded $90,000

63% of Australian SMEs took advantage of the uncapped Instant Asset Write-Off Scheme in the last financial year, before the commencement of the revised limit of $20,000 per asset.

The headline finding is contained in the most recent SME Growth Index Report by ScotPac, Australia’s leading non-bank business lender.

Since its introduction more than a decade ago, the Instant Asset Write-Off (IAWO) Scheme has allowed eligible businesses to claim an immediate tax deduction for the purchase of various assets, up to a specified threshold.

At the outset of COVID-19, the Federal Government increased the IAWO threshold from $30,000 to $150,000 to make it easier for small businesses to benefit from asset purchases. It later removed the cap entirely by introducing temporary full expensing.

With the Albanese Government committing to a revised IAWO threshold of $20,000 per eligible asset for 12 months from 1 July 2023, SMEs ramped up their use of the scheme as in the lead-up. Notable findings from the SME Growth Index report include:

  • The average amount spent by SMEs that used the IAWO scheme in FY23 was $91,500.
  • SMEs with declining or flat growth were the biggest users of the scheme with 68% purchasing eligible assets, compared with 59% of growth SMEs.
  • 75% of NSW / ACT  SMEs used the IAWO scheme, compared with just 54% of WA SMEs.

ScotPac CEO, Jon Sutton, said the IAWO scheme has been a major factor in SME decision making on capital expenditure in recent years.

“There is no doubt the Instant Asset Write-off Scheme has achieved its objective of encouraging SMEs to invest in assets to help grow their business,” Sutton said.

“In raw numbers, hundreds of thousands of SMEs were able to claim tax relief worth billions of dollars for assets purchased in 2023-24.

“When you consider the rising costs faced by all businesses in that period, including the cost of critical assets, the Instant Asset Write-off scheme has provided a great boost for SMEs,” Sutton said.

Under the current IAWO threshold, a $20,000 cap applies on an asset-by-asset basis. Assets valued at more than $20,000 are placed into the small business depreciation pool and depreciated over several years.

Sutton said while there was understandable disappointment that the temporary full expensing measure had ceased, the current IAWO scheme still provided incentives for SMEs to invest in capital.

“Average capital expenditure levels for SMEs are continuing to grow,” Sutton said.

“Many SMEs are using Asset Finance and other working capital solutions as leverage to purchase new equipment and take advantage of the tax concessions still on offer.

“While recent changes to the scheme have removed the immediate tax benefit for larger items, the $20,000 per asset cap still provides opportunities for SMEs looking to expand or upgrade their asset base,” Sutton said.

Sutton encouraged SME owners, CFOs and Procurement Managers planning to invest in new assets to talk their broker about ScotPac’s flexible Asset Finance support that can extend to 100% of the cost of new equipment.