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Independent research conducted by Octopus Group on behalf of small business lender OnDeck Australia (OnDeck) has found that three in four Australian SMEs may be missing out on the $20,000 instant asset write-off (IAWO).
The IAWO allows small businesses with a turnover below $10 million to claim an immediate tax deduction for assets priced up to $20,000.
The survey, which gathered responses from over 500 small-business owners across Australia, found that 36 per cent of small businesses said that they are not making the most of the tax write-off, while 38 per cent claimed they are “in the dark about whether they are tapping into the IAWO”.
Meanwhile, only one in four (around 26 per cent) said they are taking advantage of the tax benefit.
CEO of OnDeck Australia, Cameron Poolman, said this should be “a wake-up call” for Australia’s SME community.
“With only weeks remaining in the current financial year, there is still time for eligible businesses to make a strategic purchase and reduce their taxable income. But the asset must be in place by 30 June this year to claim the IAWO,” Poolman said.
“This important tax break gives small businesses an immediate reward for investing in assets that can boost productivity – like vehicles, machinery, tools, and office equipment. It can also help businesses expand into new products or services, or enhance their customer experience and workplace appeal through renovations or fit-outs.
“Moreover, the IAWO reduces a small business’s taxable income, driving a reduction in the company’s annual tax bill. This can free up funds for investment in other areas of the business such as marketing, research, or staff development.”
According to OnDeck, accessing commercial finance could allow more SMEs to utilise the tax write-off, with previous research showing 18.3 per cent of small-business owners said they would use the additional funding to upgrade facilities or equipment.
Along with this, 41.7 per cent said the funds would provide the confidence of having sufficient cash reserves to cover unexpected costs.
“With only weeks to go before 30 June, I encourage small businesses to speak with their tax adviser to understand if they would benefit from the IAWO in the current financial year,” Poolman said.
Prior to the federal election, the Labor government announced an extension to the IAWO scheme by an additional 12 months.
[RELATED: Labor announces extension for instant asset write-off measure]
