Australia could be set for a surge in mobile technology investment among small and medium-sized enterprise population, as up to 90,000 additional businesses qualify for small business tax exemptions under changes announced in the 2016-17 Federal Budget.
On 3 May, Treasurer Scott Morrison handed down a Federal Budget focused heavily on driving investment in the local business landscape, with small and medium-sized businesses (SMBs) among the first receive new tax breaks.
Crucially, many small business tax concessions will now apply to businesses with a turnover of up to AU$10 million, up from the AU$2 million turnover figure to which these concessions were previously limited.
The government expects these changes to benefit over 90,000 businesses that previously didn’t have access to several small business tax breaks. Among these concessions is the extension of an instant deductibility for asset purchases of up to AU$20,000, and fringe benefit tax exemptions.
The Australian Chamber of Commerce and Industry chief executive officer James Pearson has lauded the government’s decision to extend small business tax incentives, such as the AU$20,000 instant asset write-off to businesses with larger revenues, saying that such measures have already led to a 5.3 percent jump for small business investment in plant and equipment since the 2015 Budget.
“This is a great result, and shows that small businesses are making the most of the tax incentives available to them,” said Pearson in a statement.
As the tax incentives available to small businesses become available to larger businesses, it is expected that new investment will grow. While the extension of the instant asset write-off is likely to lead to greater spending on plant and equipment that will depreciate over time, the extension of small business fringe benefit tax exemptions is set to see a surge in smaller scale technology investments such as mobile devices and notebook PCs.
According to Nick Bartik, business services manager at Sydney-based accounting firm Bacchus Associates, small businesses have historically used fringe benefit tax exemptions on mobile devices and other small electronics investments. With the extension of these incentives, more companies will be spending much more on such devices.
“Since changes to fringe benefit tax exemptions in April 2016, mobile workers with the facility to get more than one device are now in a position to get many more devices than they once were,” said Bartik, who specialises in technology companies. “The extension of the definition of what a small business is, to a business with a turnover of up to AU$10 million, will see many more companies taking advantage of this facility.
“Going forward, more employers will be in a position to use the exemptions for mobile devices and other small, portable electronics products. The new definition would extend those exemptions to larger companies providing laptops to their employees. They might get a better standard of laptop, or they might choose to get more devices per employee,” he said.
However, Bartik cautioned that the expected surge in new mobile technology investment won’t happen immediately. Instead, the market may see a delay in investment in the short-term.
“The government’s new definition for small businesses is subject to both the outcome of the federal election in early June and the new Budget measures becoming law,” said Bartik. “We expect that, given this uncertainty, there may be a delay in investment until there is certainty.”
Despite the current uncertainty, Bartik expects larger companies to jump at the chance to take advantage of their newfound tax exemptions and invest more in mobile technology once the new measures come into effect.
“Certainly, for the businesses that currently don’t qualify for these concessions, the ability to immediately claim such concessions will be very attractive once they are available,” he said. “Small businesses have multiple electronic devices exempt from fringe benefit tax, and the widening of the small business definition is the key thing that is likely to make a difference to the number of electronic devices being claimed.”
According to the Australian Taxation Office, work-related items exempt from fringe benefit tax include mobile phones, laptops, tablets, portable printers, and GPS navigation receivers, as well as computer software.
The tens of thousands of Australian organisations that are set to fall under the government’s new definition of small business will be able to claim these devices from April 1 next year, when small business fringe benefit tax exemptions become available to them.