House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Josh Frydenberg MP)

General outline and financial impact

Extending and increasing the threshold for the instant asset write-off for small business entities

Schedule 1 to this Bill amends the tax law to:

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extend by 12 months to 30 June 2020 the period during which small business entities can access expanded accelerated depreciation rules (instant asset write-off); and

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increase the threshold below which amounts can be immediately deducted under these rules from $20,000 to $25,000 from 29 January 2019 until 30 June 2020.

This increase in the threshold and the extension provide a boost to small business activity and investment for a further period.

Date of effect: This measure applies on and from 29 January 2019.

Proposal announced: This measure was announced by the Prime Minister on 29 January 2019.

Financial impact: This measure is estimated to have the following revenue impact over the forward estimates period:

- nil

Human rights implications: This Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights, paragraphs 3.1 to 3.6.

Compliance cost impact: There is an estimated total average annual regulatory saving for businesses associated with this measure of $0.2 million.

Summary of regulation impact statement

Regulation impact on business

Main points:

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Small businesses contribute in many ways to the Australian economy, but they often deal with various operational challenges including cash flow problems and disproportionately higher compliance burdens.

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Increasing the immediate deductibility threshold to $25,000 for small businesses and extending the availability of the increased threshold until 30 June 2020 to provide an increased incentive for small business investment and growth by providing cash flow benefits and reducing red tape.

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This measure is expected to result in a small overall compliance saving.