Fully Expense Your Assets

Eligible businesses can now deduct the full cost of most assets in the year that they are first installed ready for use. Before the deduction was potentially spread out over several years.

This measure is to provide cash flow relief for businesses affected by COVID.

This replaces the instant asset write-off and therefore, there is currently now no longer the $150,000 cost limit.

If your business turn over is less than $5 billion you can immediately deduct the business portion new eligible depreciating assets.

Eligible assets must be first held, used, or installed and ready between 7:30pm on 6 October 2020 and 30 June 2022.

The deduction is reduced to the extent that you use the asset for private purposes.

Though most assets are eligible, the following are excluded:

• assets allocated to a low-value pool or a software development pool
• certain primary production assets (water facilities, fencing, horticultural plants or fodder storage assets), unless you are a small business entity who chooses to apply the simplified depreciation rules to these assets
• buildings and other capital works
• 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.

Businesses with a turnover of $50 million or more are excluded from temporary full expensing the cost of an eligible asset that is:

• a second-hand asset
• an asset you entered into a commitment to hold, construct or use before 7.30pm AEDT on 6 October 2020.

Instead, the standard depreciation rules will apply.

Businesses should be aware that the large deductions on offer under this measure may create a loss in 2020/2021 and some circumstances this can be undesirable.

Note: Cars can only be depreciated up to the car limit which is currently $59,136 and the depreciation claim on expensive cars is capped at this amount.

“Car” is defined as a motor vehicle designed to transport a load of less than one tonne and fewer than nine passengers (excluding motorcycles and similar).

For other vehicles like commercial vehicles, vans, buses, motor cycles etc the car limit does not apply, and they may if otherwise eligible be claimed in full under temporary full expensing.