Temporary full expensing available until 30 June 2023

In the 2021 federal budget, the government has announced that the temporary full expensing rules will be extended to 30 June 2023. This announcement follows on from the original legislation as well as slight adjustments which have occurred in the previous 6 months effective 06th October 2020 applicable to 30th June 2022.

There is no cost limit relating to the size of the deduction for an eligible asset. That is, an asset of any value may qualify for a full deduction, except for motor vehicles above the cost limit of $59,136.

So, there is an opportunity now to get tax deduction for your depreciable assets before 30th June 2021

Eligible assets

To claim a full tax deduction on a business asset, it needs to be:

• purchased by the business between 7:30pm AEDT 6 October 2020 and 30 June 2023
• installed ready for use in the business between those dates
• principally used in your business, and
• located in Australia.

New assets that are building works are not eligible, as well as some primary production assets.

You can claim a full tax deduction for the cost of a second-hand asset if your business group has turnover less than $50 million per annum.

Installations and upgrades

The cost of installing an asset, so that it is ready to be used, can qualify for a full deduction in its own right.

Also, if you have an older asset that needs an upgrade, the cost of the upgrade can qualify for an outright deduction as well. Installations and upgrades are subject to the rules above.

Editor’s note: It is advisable to select either the “opt out” or the “small business rules” paragraph as needed for your client.

Opt out available

As part of the follow-up amendments from the 2020 federal budget, you are also allowed to pick and choose which eligible assets to fully write-off.

This provides you an opportunity to review your eligible assets this year and determine whether it is feasible to claim an outright deduction. [This is especially important for tax planning purposes in the lead up to making your trust’s annual income distribution.] / [This may be important for tax planning purposes, especially if you are not interested in claiming a loss carry-back for your company this year.]

Small business rules

Any new or second-hand assets that meet the installation requirements are immediately written-off this year as an instant asset write-off. As well as the deduction for eligible full expensing assets, your entire small business depreciation pool will also be written off.

This may create a large reduction in your tax liability this year. However, please note that you can vary your income tax instalments in anticipation of your reduced tax bill.

We understand that these additional deductions will put your business into a loss position, which effectively loses your tax-free threshold. Please contact us if you wish to discuss this further, including other options available to you and your business this year.

This large deduction may not be something you want to claim all at once and would rather smooth out over a number of years. Unfortunately, as a small business you are ineligible to “opt out” of the full expensing rules. Please contact us if you wish to discuss this further, including other options available to you and your business this year.

For further assistance with the above announcements and opportunities, please contact your RCB Advisors team member as soon as possible.

Source: CCH