Treasurer Josh Frydenberg announced on June 9 that the Australian government would extend the $150,000 instant asset write off until December 31, a move welcomed by the car dealers association.
Declared in a joint media release with the Minister for Employment Skill, Small and Family Business Michaelia Cash, the write-off scheme was initially designed to run from March 12 until June 30.
However, the federal government extension will aid 3.5 million businesses and improve their cash flow, the treasurer said.
According to the Australian Tax Office the asset write-off allows businesses that purchase any assets worth less than $150,000 to claim the purchase as an immediate tax deduction.
Businesses become eligible for the write-offs if they earn less than $500 million yearly and the assets purchased were put in use after March 12, 2020.
The scheme also covers multiple purchases of both new and second-hand assets as long as the assets price is below $150,000.
Pointing out that this scheme was “designed to support business sticking with the investment they had planned,” Frydenberg said it would encourage businesses “to bring investment forward to support economic growth over the near term.”
“Hardworking Australian businesses can rest assured that the Morrison Government will do all that is necessary to support them to bounce back stronger and get to the other side of this crisis,” said Frydenberg.
Estimated to have a cost of $300 million, the extension of the scheme was welcomed by the Australian Automotive Dealers Association (AADA).
“This is very welcome news for car Dealers, and we hope that this will help our industry recover from the significant downturn we have experienced in new car sales,” said CEO of AADA James Voortman in a media release on June 9.
“I would like to congratulate the Government on this announcement which will encourage businesses to invest during a time in which our economy will need it,” he continued.
In a policy brief released on June 5 (pdf) AADA had called on the federal government to extend the write-off scheme for a further six month period after the retail automotive industry suffered a severe financial downturn amid the CCP (Chinese Communist Party) virus pandemic, commonly known as novel coronavirus.
In the brief, AADA said that many businesses were not prepared to invest in assets during the lockdown and “many of the intended recipients of the instant asset write-off, such as sole traders, are being treated as high-risk customers by lending institutions.”
In a media release on June 3, Voortman noted: “Passenger cars are Australia’s third-biggest import; dealerships employ nearly 60,000 people, and the wider automotive industry employs more than 300,000 people.”
“It is now clear that the government should consider a stimulus for the sale of new cars. So many other countries are currently providing consumers with incentives to buy new cars which are safer, cleaner and more efficient than the cars they replace on our roads,” Voortman said.