Businesses with a turnover of less than $500 million can between 12 March 2020 and 30 June 2020 claim a full depreciation tax deduction in 2020 financial year for any individual asset costing less than $150,000.
The $150,000 threshold applies on a per asset basis so eligible businesses can immediately write-off multiple assets and applies for new or second-hand assets first used or installed ready for use by 30 June 2020.
If you purchase a car for your business, the instant asset write-off is limited to the business portion of the car limit of $57,581 for the 2019–2020 income tax year. You cannot claim the excess cost of the car under any other depreciation rules.
Example - Purchase of a motor vehicle for business purposes – the effect of the car limit for depreciation.
Edward and Edna own and run a small irrigation supplies business. On 27 March 2020 the business purchases a luxury car that is designed to carry passengers, for $80,000. The instant asset write-off threshold at the time they first use the car in the business is $150,000.
The cost of the car for depreciation is limited to the car limit at that time. As the cost of the car is above the $57,581 car cost limit for depreciation, the business can only claim an instant asset write-off of $57,581 for the year ending 30 June 2020. The business can't claim the excess cost of the car under any other depreciation rules.
They also decide to update their work ute and the business purchases a ute for $65,000 on 27 April 2020. The ute isn't designed to carry passengers (and has been set up with all the trade tools in the tray) so the car cost limit for depreciation doesn't apply. The business can claim a full deduction of $65,000 as an instant asset write-off.
ACCELERATED DEPRECIATION DEDUCTIONS
A time-limited 15-month investment incentive (through to 30 June 2021) which will operate to accelerate certain depreciation deductions.
This measure will also be available to businesses with a turnover of less than $500 million, which will be able to immediately deduct 50% of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost.
Eligible businesses are those with an aggregated turnover below $500 million and carrying on a business.
As announced, this measure is proposed to only apply to new depreciating assets first used, or installed ready for use, by 30 June 2021. Asset must be first held on or after 12 March 2020
And no contract for the asset before 12 March 2020.
Eligible assets are those that can depreciated under Division 40 of the Income Tax Assessment Act 1997 (that is plant, equipment and specified intangible assets, such as patents), but does not apply to second-hand Division 40 assets, or buildings and other capital works depreciable under Division 43.
TEMPORARY RELIEF FOR FINANCIALLY DISTRESSED BUSINESSES
The Government is proposing several temporary measures to lessen the risk of a surge in insolvencies and allow more businesses to trade through this difficult period. These measures include:
- a temporary six-month increase to the threshold at which creditors can issue a statutory demand on a company under the Corporations Act 2001 from $2,000 to $20,000.
- a temporary extension to the statutory timeframe for a company to respond to a statutory demand from 21 days to six months. This extension will apply for six months.
- a temporary increase to the threshold at which creditors can initiate bankruptcy proceedings against a debtor who is not incorporated from $5,000 to $20,000. This will apply for six months a temporary extension to the period that a debtor has to respond to a bankruptcy notice from 21 days to six months. This will apply for six months.
- a temporary extension to the period under which an unsecured creditor cannot take further action to recover debts when a debtor declares an intention to enter voluntary bankruptcy from 21 days to six months. This will apply for six months.
- giving directors temporary relief from personal liability for insolvent trading with respect to any debts incurred in the ordinary course of the company’s business. This relief will apply for six months but will not apply to egregious cases of dishonesty and fraud.
To enable the government to respond to other issues at a time where Parliamentary sittings will be disrupted, the government proposes giving the Treasurer a temporary instrument-making power in the Corporations Act 2001 to temporarily amend provisions of the Act to provide relief from specific obligations or to modify obligations to enable compliance with legal requirements during the crisis. The instrument-making power will apply for six months. Any instrument made under this power will apply for up to six months from the date it is made.
FOR MORE INFORMATION
Please refer to the DELIVERING SUPPORT FOR BUSINESS INVESTMENT FACT SHEET from The Treasury. It provides further details of eligibility requirements, timing and examples.
Please refer to the TEMPORARY RELIEF FOR FINANCIALLY DISTRESSED BUSINESSES FACT SHEET from The Treasury. It provides further details and examples.