In their 2020–2021 and 2021–2022 income years, eligible businesses can immediately deduct the business portion of the cost of eligible new depreciating assets and cost of improvements to existing assets. If your business's aggregated turnover is less than $5 billion, you can use temporary full expensing.
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.
For businesses with an aggregated turnover of less than $50 million, temporary full expensing also applies to the business portion of eligible second-hand depreciating assets.
If you can claim an immediate deduction for an asset under temporary full expensing, you cannot claim it using other depreciation rules (such as backing business investment – accelerated depreciation).
If temporary full expensing does not apply to you, you may be able to claim a deduction under backing business investment – accelerated depreciation or instant asset write-off.
If an asset qualifies for an immediate deduction under temporary full expensing in an income year, you can choose to claim a deduction using other depreciation rules. However, you must notify the ATO in an approved form that you have chosen not to apply temporary full expensing to the asset. The choice is unchangeable, and you must notify the ATO by the day you lodge your income tax return for the income year to which the choice relates.
If you have a company, you may make a tax loss in an income year as a result of claiming an immediate deduction under temporary full expensing. If you make a tax loss and you are eligible, you can choose to either:
- carry your loss forward to use it to offset its future income
- have a refundable tax offset under loss carry back.
You claim temporary full expensing in your tax return. The Australian Taxation Office (ATO) are updating 2020–2021 tax return forms to ensure they are ready for 1 July 2021. If your business is going to lodge your 2020–2021 company tax return before 1 July 2021, the ATO are working through how you can make a temporary full expensing claim.
INSTANT ASSET WRITE OFF – RECENT CHANGES
For assets first used or installed ready for use between 12 March 2020 until 30 June 2021, and purchased by 31 December 2020, the instant asset write-off:
- threshold amount for each asset is $150,000 (up from $30,000)
- eligibility extends to businesses with an aggregated turnover of less than $500 million (up from $50 million).
For assets you start to hold, and first use (or have installed ready for use) for a taxable purpose from 7.30pm (AEDT) on 6 October 2020 to 30 June 2022, the instant asset write-off threshold does not apply. You can immediately deduct the business portion of the asset's cost under temporary full expensing.