Full expensing on business asset purchases until 30 June 2022

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From 6 October 2020 to 30 June 2022, business asset purchases can be fully claimed as an expense (‘full expensing’) for businesses with up to $50 million turnover. To help encourage investment in new business assets aimed at increasing productivity, the depreciation limit and business rules still apply to motor vehicles.

This initiative, ‘Temporary Full Expensing’ (TFE), is another government measure intended to stimulate business investment, employment growth, and the overall economy for Australia as the world continues to navigate its way back from the disruption of pandemic conditions.

There is no threshold on the value of purchased business assets that can be written off as an expense and it applies to new and secondhand assets. The eligible new assets must be first held, and first used or installed ready for use for a taxable purpose, between 7.30pm AEDT on 6 October 2020 and 30 June 2022.

Businesses can also immediately deduct the business portion of the cost of improvements to eligible depreciating assets (and to assets acquired before 7.30pm AEDT on 6 October 2020 that would otherwise be eligible assets) if those costs are incurred between 7.30pm AEDT on 6 October 2020 and 30 June 2022. Motor vehicles remain subject to the depreciation limit and business rules as before.

Interaction of tax depreciation incentives

Eligible businesses may want to know which tax depreciation incentive is right for them, which is where a good accountant comes in. The ATO has prepared a high-level snapshot to help you work out how temporary full expensing, backing business investment, or instant asset write-off may apply to you. If you’re interested, we’re happy to explain more about business asset expensing and the interaction of tax depreciation incentives for more informed decision-making for your business.

 

Some business owners may not have the confidence to invest in significant business assets, for the time being, no matter what incentives are offered by the government, due to the impacts of pandemic restrictions on their business over the last financial year, and uncertainty as to when their industry sector might fully return to pre-pandemic trading conditions. Other businesses have experienced growth as a direct result of the pandemic and may have concerns about the sustainability of growth when day-to-day business life becomes more ‘normal’.
Sadly, a number of businesses that endured through early lockdown periods could not subsequently survive with their pre-COVID business model and either pivoted away from their traditional offerings or closed altogether. Encouragingly, history shows many examples of businesses that came through challenging periods in the past (eg: wars, great recessions, and economic depression) to emerge stronger and with greater investment in business assets on the other side.
If you’re considering taking advantage of business asset purchase incentives over the 2021-2022 period and would like some advice, talk to Geoff Morris at Billings+Ellis.

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