Eligible businesses, for the 2019–2020 and 2020–2021 income years, may be able to deduct the cost of new depreciating assets at an accelerated rate using the backing business investment – accelerated depreciation rules.
For each new asset, the backing business investment – accelerated depreciation deduction applies in the income year that the asset is first used or installed ready for use for a taxable purpose. You claim the deduction when lodging your tax return for the income year. The usual depreciating asset arrangements apply in the subsequent income years that the asset is held.
If you are eligible for backing business investment – accelerated depreciation, you can choose to not apply these rules to an asset. The choice can be made on an asset-by-asset basis but cannot be changed once made. You make the choice in your tax return and you must notify the Australian Taxation Office (ATO) by the day you lodge your tax return for the income year in which the choice relates.
ELIGIBLE BUSINESSES
Businesses are eligible for the backing business investment – accelerated depreciation deduction if they have an aggregated turnover of less than $500 million in the year, they are claiming the deduction. The deduction is available in the 2019–2020 and 2020–2021 income years.
ELIGIBLE ASSETS
To be eligible to apply the accelerated rate of deduction under backing business investment, the depreciating asset must:
- be new and not previously held by another entity (other than as trading stock)
- be first held on or after 12 March 2020
- first used or first installed ready for use for a taxable purpose on or after 12 March 2020 until 30 June 2021
- not be an asset to which an entity has applied either
- temporary full expensing or
- the instant asset write-off rules.
Eligible assets do not include:
- second-hand depreciating assets
- some specific Division 40 assets subject to low value and software development pools
- certain primary production assets (water facilities, fencing, horticultural plants, or fodder storage assets), unless you are a small business entity that chooses to apply the simplified depreciation rules to these assets
- buildings and other capital works for which you can deduct amounts under Division 43
- assets that
- will never be located in Australia, or
- will not be used principally in Australia for the principal purpose of carrying on a business
- other specific capital asset and expense deductions
- assets you were committed to acquiring before 12 March 2020
There is no limit on the number of eligible assets that you can apply accelerated depreciation to in an income year under backing business investment.
There is no limit on the cost of an eligible asset unless it is a passenger vehicle. A car limit applies to the cost of passenger vehicles (except a motorcycle or similar vehicle) designed to carry a load less than one tonne and fewer than 9 passengers.
The car limit is:
- $57,581 for the 2019–2020 income year
- $59,136 for the 2020–2021 income year.