Small business to take tax-break hit

Katina Curtis
The government is dumping an asset write-off for small businesses that was linked to the mining tax.

The federal government is setting a "tax trap" for small business by drastically reducing a tax break before legislation for it has passed, the opposition claims.

Small Business Minister Bruce Billson's office has confirmed that the $6500 instant asset write-off introduced by the former Labor government will end from January 1.

Instead, businesses will be able to get instant tax break for assets worth up to only $1000.

The tax break was linked to the mining tax.

Its formal dumping is contained in the mining tax repeal bill, currently stuck in the Senate, but legislation for tax measures can be applied retrospectively.

Acting opposition leader Penny Wong said it was a "tax trap for 2.7 million Australian small businesses and sole traders".

Shadow treasurer Chris Bowen said it was highly unusual for a government to make tax such changes and not publicise them.

"Have we seen any information campaign for small business saying listen, if you want to make an investment you'd better make it now because your tax write-off ends on 1 January? No," he told reporters in Sydney on Tuesday.

"I don't think they're very proud of this change."

Dropping the level of the instant asset write-off was part of the coalition's election commitments.

Information on the Australian Taxation Office's website, dated December 18, says the change is "expected to come into effect" on January 1.

Business representatives - the Australian Chamber of Commerce and Industry and the Australian Industry Group - have told the government that they'd like to see the asset write-off funded in the next federal budget.