Is the Instant Asset Write-off Scheme Here to Stay?
The Australian finance industry, alongside various small business associations, is actively advocating for the permanent establishment of the Instant Asset Write-Off (IAWO) scheme. This initiative aims to provide businesses with immediate tax deductions for qualifying asset purchases, thereby enhancing cash flow and encouraging investment.
Background of the Instant Asset Write-Off
Introduced to stimulate economic activity, the IAWO allows eligible businesses to deduct the full cost of qualifying assets in the year they are first used or installed, rather than depreciating them over several years. Initially, businesses with an aggregated turnover of less than $10 million were eligible, and the asset threshold has varied over time. For example, from July 1, 2023, to June 30, 2025, the threshold was set at $20,000.
Industry Calls for Permanency
The Mortgage & Finance Association of Australia (MFAA) has been vocal about the need for certainty regarding the IAWO. In their pre-budget submission, MFAA CEO Anja Pannek emphasized that making the scheme permanent would provide clarity for members in commercial and asset finance, as well as their clients. She stated, "The permanency of the instant asset write-off is something we called for in our pre-budget submission to give certainty to our members."
Similarly, the Commercial and Asset Finance Brokers of Australia (CAFBA) and the Council of Small Business Organisations Australia (COSBOA) have expressed concerns over the temporary nature of the IAWO. They argue that frequent changes and annual legislation create uncertainty, making it challenging for businesses to plan investments effectively. COSBOA's CEO, Luke Achterstraat, highlighted that without a permanent write-off, small businesses face significant difficulties in managing cash flow and making long-term investment decisions.
Government's Position and Industry Response
In the lead-up to the May 2025 federal election, the Coalition has pledged to make the IAWO permanent with a raised threshold of $30,000 for businesses with turnovers up to $10 million. Shadow Treasurer Angus Taylor argued that this commitment would free up cash for businesses to invest, take risks, and create jobs. He criticized the Labor government's approach, stating that their decision to limit the write-off to $1,000 after June 30, 2025, would harm small businesses.
Conversely, the Labor government has pledged to extend the IAWO for another year, maintaining the $20,000 threshold until June 30, 2026. However, they have not committed to making the scheme permanent. This stance has faced criticism from industry leaders who view the proposed temporary extension as insufficient. Master Builders Australia's CEO, Denita Wawn, expressed disappointment, stating that relying on annual legislation creates uncertainty for businesses needing time to make investment decisions.
