Federal Budget 2019-20 | Small and medium business tax

April 3, 2019

The Government has announced an expansion of the instant asset write-off threshold from $25,000 to $30,000, with medium-sized businesses (with a turnover of up to $50m) now also qualifying. Further, additional funding of $60 million will be provided over three years for small and medium enterprises to support Australian exports.

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Instant asset write-off

Following the Government’s announcement on 29 January 2019 to increase the instant asset write-off threshold to $25,000 and extend the eligible purchase period to 30 June 2020, this Budget announcement increases the threshold even further to apply to assets costing less than $30,000, while retaining the 30 June 2020 deadline.

While the deduction measure was previously limited to small businesses (being those businesses with an aggregated annual turnover of less than $10 million), it will soon extend to “medium-sized business” with an aggregated turnover of less than $50 million. This means all businesses with an aggregated turnover of less than $50 million will be able to obtain an immediate deduction for eligible assets costing less than $30,000 that are first used, or installed ready-for-use, from Budget night to 30 June 2020.

We note that the instant asset write-off for medium-sized businesses will only apply to assets that were acquired after 2 April 2019 and will not apply to assets acquired before this date (even where they are first used or installed ready for use after Budget night).

Given the announcements made on 29 January 2019, there are effectively three different thresholds that will apply for purchases made during the 2019 financial year. In summary, the immediate deduction will be available in respect of assets that cost:

  • up to $20,000, purchased from 1 July 2018 to 28 January 2019 (for small business)
  • up to $25,000, purchased from 29 January 2019 to 2 April 2019 (for small business)
  • up to $30,000, purchased from 2 April 2019 to 30 June 2020 (for both small and medium-sized business)

The Budget announcement makes it clear that the existing small business tax depreciation concessions, including the pooling rules, will continue to apply to those businesses with aggregated turnover of less than $10 million, and will not be extended to medium sized businesses.

The expansion of the instant asset write-off to medium-sized businesses is a positive outcome for those businesses otherwise overlooked in this year’s budget. This measure will help to provide moderate cash flow benefits to an estimated 22,000 additional businesses.

Export Market Development Grant (EMDG)

The Government announced that it will provide additional funding of $60 million to the EMDG scheme over a three-year period to support small and medium enterprises (SMEs) that export Australian goods and services to overseas markets.

The EMDG is currently available to Australian exporters who have income of less than $50 million and who promote their products to international customers. The objective of the EMDG is to reimburse eligible entities up to 50% of their promotional expenses (i.e. advertising, marketing, overseas travel to trade shows) incurred above $15,000. The minimum grant entitlement is $5,000 and the maximum is $150,000 per annum.

Whilst not significant, the additional funding will assist those Australian small business entities looking to build and expand their brand overseas.

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