Temporary full expensing supports businesses and encourages investment, as eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year it is first used or installed ready for use for a taxable purpose.
Eligible entities
You may be eligible for temporary full expensing if you are one of the following:
- a business with an aggregated turnover of less than $5 billion
- a corporate tax entity that meets the alternative income test.
The rules for calculating aggregated turnover are the same as those used for the small business entity concessions. Your aggregated turnover may include the annual turnover of other business entities in addition to your own annual turnover.
You claim your deduction when lodging your 2020–21, 2021–22, 2022-23 tax returns.
Eligible assets
To be eligible for temporary full expensing, the depreciating asset must be:
- new or second-hand (if it is a second-hand asset, your aggregated turnover is below $50 million)
- first held by you at or after 7.30pm AEDT on 6 October 2020
- first used or installed ready for use by you for a taxable purpose (such as a business purpose) between 7.30pm AEDT on 6 October 2020 and 30 June 2023.
Exclusions
Eligible assets don’t include:
- 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) that are primary production depreciating assets, unless you’re a small business entity who chooses to use the simplified depreciation rules for these assets
- buildings and other capital works you can deduct amounts for under Division 43
- assets that either
- will never be located in Australia
- won’t be used principally in Australia for the principal purpose of carrying on a business.
If your business has an aggregated turnover of $50 million or more, you can’t immediately deduct 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.
If you’re applying the alternative income test, more exclusions apply.
If your asset is not eligible, or you have chosen not to use temporary full expensing for the asset for a particular income year, you may be able to use other depreciation provisions, such as:
- Instant asset write-off for eligible businesses
- Backing business investment – accelerated depreciation
Improvements
You can also immediately deduct the business portion of the costs of improvements incurred between 7.30pm AEDT on 6 October 2020 and 30 June 2023 for:
- eligible assets
- existing assets (assets that would be eligible assets except that you held them before 7.30pm AEDT on 6 October 2020).
However, you can’t claim the acquisition cost of existing assets under temporary full expensing.
If your business has an aggregated turnover of $50 million or more, you can immediately deduct the business portion of the cost of improvements to an asset that would otherwise be excluded because it is either:
- a second-hand asset
- an asset you entered into a commitment to hold, construct or use before 7.30pm AEDT on 6 October 2020.
Further information is available at https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/Temporary-full-expensing/
