Act NOW to take advantage of the immediate depreciation rules

By Chris Smith

On 6th October the Government released the Federal Budget for 2020/21, and one of the stand out announcements is the Temporary Full Expensing of Depreciating Assets which will run until 30 June 2022.

Key Actions to Take:

  • Act NOW – deductions are only available if the assets are installed ready for use. Supply chain shortages affecting capital equipment are delaying the delivery of orders.  Make sure you are taking action now to ensure your deductions are realised this year.
  • Tax planning – is the immediate deduction this year the best outcome? Depending on your structure (particularly for trusts, partnerships, and individuals) the immediate write-off may actually be a worse outcome for taxpayers compared to the deduction applying under normal depreciation rules.
  • Consider opting out of the SBE General Asset Pool
  • Review whether the Tax Loss Carry-Back provides an additional incentive to achieve a tax deduction for depreciable assets – refer to separate article for further details.

Be Aware of:

  • Current balance of General Asset Pool that MUST be expensed in full in FY 2021
  • Exclusions (buildings, property improvements, software development pool)
  • Assets acquired pre October 6 (subject to other rules)
  • Turnover rules < $50m turnover can also receive full deduction for acquisition of 2nd hand assets
  • Balancing adjustment (income) for assets sold during the year
  • Car Limit – $59,136
  • Opt-out rules don’t apply in all circumstances, and come with additional reporting requirements

 

If you have any questions on the Temporary Full Expensing of Depreciating Assets or would like to discuss some of the planning opportunities that may be available, please contact our office on (08) 6212 7200.