The ATO is offering $150,000 per asset write-offs as an economic lifeline for small businesses struggling financially amid the pandemic. Despite the write-offs being five times the normal amount granted to small businesses in a financial year, most are not partaking.
A survey by SME Finance Group found that three-quarters of Australia’s small-to-medium enterprises (SMEs) have failed to take advantage of the asset write-offs. Michael Pratt, the company’s Founding Director of Specialist Business Lenders, called it a “missed opportunity”.
The government’s COVID-19 plan includes a spending commitment of $700 million this year to boost the instant write-off scheme. The incentive is meant to provide financial support to businesses to purchase big-ticket items, such as automobiles or equipment, to continue or adapt their operations during challenging times. But most businesses seem to be more concentrated on saving rather than spending.
“We’re finding the majority of eligible companies are concentrating on other Government COVID-19 incentives and appear to have forgotten the $150,000 write-off per asset available to them through the ATO,” Mr. Pratt said.
As the June 30 deadline approaches, Mr. Pratt urges small businesses to start the process as soon as possible. In most instances, businesses will need to define their purchasing plans, organise their finances, and order goods to qualify on-time.
“So we urge them to work with their accountants and financiers now to maximise this opportunity appropriately before it’s too late. There could millions of dollars available to them to invest constructively that they’ll potentially miss out on.”
Small businesses, in particular, could be missing out massively. “Maybe they don’t know how to go about securing the monies, especially smaller private companies with a turnover of less than $50 million that have likely structured their business financing in a way that’s unique to them,” Mr Pratt said. These smaller companies may struggle to get finances in order in time and their accountant to “tick all the necessary boxes to help ensure their applications are successful”, Mr. Pratt said.
Some sectors, such as hospitality and tourism, have been more negatively affected by the covid-19 pandemic and the long-term consequences of the lockdown are largely unknown. Understandably, up-front spending may not be a top priority for SMEs in hard-hit industries. Even so, Mr. Pratt highlights the importance of businesses staying informed of all economic opportunities available to them.
“We appreciate it’s a stressful time and nobody has a crystal ball. However, a significant proportion of business owners will start to see green shoots in the coming months,” Mr. Pratt said.
“Of course, some sectors will be more impacted than others, but those who act informedly now will have the advantage of a brighter outlook moving forward.”
As an unprecedented asset write-off, Pratt is unsure why more eligible businesses are not currently taking advantage of this opportunity.