Did you miss out on the Instant Asset Write-Off?
Never fear! The Temporary Full Expensing is HERE!!!
To help assist businesses with cash flow, the ATO has introduced the new temporary full expensing measure. Eligible businesses will be able to fully deduct upfront, the cost of most assets in the year they are first installed. With the potential to spread the deduction over several years, this new measure is favourable over the instant asset write-off.
Furthermore, Temporary Full Expensing, effectively replacing the current $150,000 depreciation cost limit, means that the instant asset write-off is no more..
Does your business have an aggregated turnover of under $5 billion? If so, newly-acquired assets can have the business portion of the cost deducted immediately.
There are a few simple guidelines to follow for an asset to be eligible. The business must have first held, and first used or installed the asset. Secondly, this must be done between 7:30pm on 6 October 2020 and 30 June 2022.
What is the extent of the deduction? To the extent that you use the asset for private purposes.
Expensing Exclusions
There are some exclusions, however, although most assets are eligible. As per the ATO website, these exclusions include:
- assets allocated to a low-value pool or a software development pool
- certain primary production assets (water facilities, fencing, horticultural plants or fodder storage assets). This is for small business entities who chooses to use the simplified depreciation rules to these assets
- buildings and other capital works for which you can deduct amounts under Division 43
- assets that either
- will never be located in Australia
- for the principal purpose of carrying on a business, will not be used principally in Australia.
However, does your business have an aggregated turnover of $50 million or more? If so, you will find that this excludes you from the immediate cost deduction of eligible assets. This includes assets that are second-hand or an asset you entered into a commitment to hold, construct or use before 7.30pm AEDT on 6 October 2020.
Your business must apply normal depreciation rules in these circumstances.
However, if the large deductions on offer under this measure are likely to create a loss for your business in 2020/2021, we would encourage you to speak to your advisor first.
Do you need help choosing the accountant that’s right for you and your business? Just ask us – we work with many great accounting firms on the Gold Coast and would be happy to put you in touch with the right one for your circumstances!
Resources
Business Incentive Summary:
