There’s never been a better time to upgrade
The Australian Government
had added to its range of unprecedented
stimulus schemes to incentivise
continued investment in
This is an extraordinary
level of support
which makes it attractive to
purchase equipment and
upgrade the fleet.
are crucial to
create cashflow and
How does it work?
Temporary Full Expensing to support investment and jobs
Deduct the full cost of new eligible depreciating assets
first used or installed by
30 June 2022*
no upper threshold
Applies to eligible second-hand assets
for small to medium businesses
*Purchased from 6 October 2020
Instant Asset Write-Off (IAWO)
New or second hand
up to $150,000
31 December 2020
First used or installed by
30 June 2021
Backing Business Investment (BBI)
A bonus 50% depreciation
to be written off immediately
50% of the
no upper threshold
For capital purchases
first used or installed by
30 June 2021
Many more businesses around Australia will have access to the support measures that provide them with the cash flow to invest in assets they require to succeed now and into the future.Nathan Murray,
Managing Director of Morris Finance
Temporary Full Expensing
On 6 October 2020, as part of the 2020–21 Budget, the government announced that it will target support to businesses and encourage new investment, in part through a temporary full expensing incentive. This measure is now law.
Eligible businesses with an aggregated turnover of less than $5 billion can deduct the full cost of new eligible depreciating assets that are first held, and first used or installed ready for use for a taxable purpose, between 7:30pm AEDT on 6 October 2020 (the 2020 Budget time) and 30 June 2022.
For small and medium sized businesses (with aggregated turnover of less than $50 million), full expensing also applies to eligible second-hand assets.
Businesses can also deduct the full cost of improvements made during this period to depreciating assets, whether those assets were acquired before or after the 2020 Budget time.
The measure also extends the time by which assets that qualify for the existing enhanced instant asset write-off incentive that applies to small and medium sized businesses must be first used or installed ready for use for a taxable purpose by 6 months, to 30 June 2021.
Small businesses (with aggregated turnover of less than $10 million) can deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies.
The provisions that prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out of the regime continue to be suspended.
Instant Asset Write-off
The Australian Government has temporarily increased the
instant asset write-off threshold (IAWO) from $30,000 to $150,000.
The threshold applies on a per asset basis, so eligible businesses can immediately write-off multiple assets.
It also applies to both new and used assets, so long as the assets have been purchased in the current financial year.
The IAWO is applicable:
- for assets purchased on or before 31 December 2020
- and used or installed by 30 June 2021.
- The annual turnover threshold
- $500 million total (aggregated) ordinary income of your business and that of any associated businesses.
The IAWO has now been extended and is expected to revert to $1,000 for small businesses (turnover less than $10 million) as of 1 January 2021.
How to apply
To claim the IAWO, you need to make the purchase and use the asset for your business in the same year that you claim the deduction.
Exclusions and limits
There are a small number of assets that are excluded.
Backing Business Investment Scheme
Businesses with an aggregated turnover of less then $500 million
for the 2019-20 and 2020-21 income years are eligible to
deduct the cost of depreciating assets at an accelerated rate.
The amount the entity can deduct in the income year the asset is first used or installed ready for use is:
- 50% of the cost (or adjustable value where applicable) of the depreciating asset
- plus the amount of the usual depreciation deduction that would otherwise apply but calculated as if the cost or adjustable value of the asset were reduced by 50%.
- You can 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.
To be eligible the asset must be:
- new and not previously held by another entity (other than as trading stock)
- first used or first installed ready for use for a taxable purpose on or after 12 March 2020 until 30 June 2021
- an asset which no entity has already applied the instant asset write-off rules or depreciation deductions.
Eligible assets do not include:
- second-hand depreciating assets
- assets you were committed to acquiring before 12 March 2020.
Check out these examples
These examples of the Backing Business Investment accelerated
depreciation scheme explore a couple of common scenarios:
Small business benefits
Joan and Bruce own a company, NC Transport Solutions Pty Ltd, through which they operate a haulage business on the North Coast of New South Wales.
NC Transport Solutions Pty Ltd has an aggregated annual turnover of $8 million for the 2019–20 income year. On 1 May 2020, Joan and Bruce purchase a new truck for $260,000, exclusive of GST, for use in their business.
Under past tax arrangements, NC Transport Solutions Pty Ltd would depreciate the truck using their general small business pool.
This means that NC Transport Solutions Pty Ltd would deduct 15% of the asset’s value when they added it to the pool, leading to a tax deduction of $39,000 for the 2019–20 income year (assuming there are no other assets in the pool).
Under the new accelerated depreciation, NC Transport Solutions Pty Ltd will instead claim a deduction of 57.5% when they add it the pool, leading to a deduction of $149,500 for the 2019–20 income year.
Middle-sized business benefits
J Construction Solutions Pty Ltd has an aggregated annual turnover of $200 million for the 2020–21 income year.
On 1 July 2020, J Construction Solutions Pty Ltd installs a $1 million truck mounted concrete pump for use in the business.
Under past tax arrangements, in the first year J Construction Solutions Pty Ltd could claim 30% depreciation when using the diminishing value method (based on the asset’s effective life of six and two thirds years).
Under the new accelerated depreciation, J Construction Solutions Pty Ltd can claim a depreciation deduction of $650,000 in the 2020–21 income year.
This consists of 50% of the concrete pump’s value under the new accelerated depreciation ($500,000) plus 30% of the remaining $500,000 under existing depreciation rules ($150,000).
What to do now?
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