Investing in New Assets for an Immediate Deduction

The Treasurer has announced a new tax incentive addressing business asset purchases as part of the 2020/2021 Budget Announcement.

Effective from 7.30pm 6 October 2020, eligible businesses will be able to deduct the full cost of eligible depreciable assets of any value. Most assets used in the course of business will qualify as eligible depreciable assets (with some exceptions for pooled and primary production assets).

In addition, the cost of improvements made during the specified period to existing eligible depreciable assets can be fully deducted.

To participate in the unlimited immediate asset write off incentive, the following eligibility criteria must be met:

• Businesses must have an aggregated annual turnover of no greater than $5 billion
• The depreciable asset was acquired between the period of 7:30 PM 6 October 2020 to 30 June 2022
• The depreciable asset was first used or installed ready for use within the period of 7:30 PM 6 October 2020 to 30 June 2022
• Improvements to already existing eligible depreciable assets were first made within the period of 7:30 PM 6 October 2020 to 30 June 2022
• The asset is a new depreciable asset used within the scope of conducting a business

Under the new immediate asset write off measure, extra incentives are available to small and medium businesses, as follows:

• Small & medium businesses with an aggregated annual turnover of up to $50 million will be able to expense any second-hand assets purchased within the period of 7:30 PM 6 October 2020 to 30 June 2022
• Small businesses with an aggregated annual turnover of up to $10 million can also deduct the balance of their simplified depreciation pool at the end of the 2021 or 2022 financial year

This measure will effectively enable businesses to fully expense all eligible depreciable assets, regardless of value, in the first year that they are purchased and used or installed. As such, it will ease the tax burden on businesses which are able to invest in new or second-hand assets over the next 21 months.

If you need assistance understanding what these changes mean for you, don’t hesitate to call us on 07 3844 5555 to discuss with a Macro team member today.