Businesses have spent a spending spree to take advantage of the instant asset write-off scheme – even splurging on helicopters.
Businesses have gone on a spending spree to take advantage of the federal government’s extended instant asset write-off scheme, splurging on bakery machines, coffee makers, and even helicopters.
National Australia Bank figures show equipment spending at the end of April jumped 24 percent year-on-year across its business customers as firms sought to take advantage of the tax minimization scheme.
The Morrison government extended the scheme in last week’s federal budget until 2023 and allows an immediate deduction of the business portion of the cost of an asset.
NAB business bank executive Michael Sadie said the extension was partly to boost productivity and efficiency throughout the economy.
“One of the reasons why the government extended it was to keep the momentum in the economy going,” Mr. Saadie said. NAB found purchases of cars and light commercial vehicles rose 132 percent over the year to April while buying manufacturing equipment including bakery, fridges, and hospitality equipment lifted 133 percent.
It also discovered aircraft purchases such as helicopters and planes had increased by 97 percent compared to one year ago. Since the extension of the scheme, equipment purchasing demand had been a significant influence on the severe lack of supply for specific items such as cars, Mr Saadie said.
Both new and used car markets have had significant supply shocks since the start of the pandemic, with shipping disruptions playing a role.
“If you talk to any tradesperson who are trying to buy a new work vehicle, the degree of choice has been minimised,” he said. “It is putting more price escalation into the used car market.”
Mr Saadie noted the surge in demand had fuelled debate about bringing more manufacturing back to Australian shores. “We are certainly seeing a lot more local manufacturing in the supply chain while the supply chains are being disrupted (from COVID-19),” he said.
The federal government has set aside close to $17.9bn in associated costs for the extension of the instant asset write off scheme over the next four years.
Mr. Saadie said the scheme had also created a new side-industry of refurbishing old equipment to resell.
He also noted several firms were using the scheme to update office spaces to attract workers back into CBD offices.