The temporary full expensing scheme is an incentive that allows businesses to instantly claim a tax deduction of business assets in one lump sum, with the intention of stimulating investment, helping to maintain jobs and economic activity.
To be eligible, your business must have an annual turnover of under $5 billion to claim a full deduction for new assets and if your turnover is less than $50 million, you are also eligible to claim the full amount of used assets.
The assets must be first held, and first used or installed ready for use for a taxable purpose, between 7.30 pm (AEDT) on the 6th of October 2020 and the 30th of June 2023.
But what can you claim?
There is a wide range of assets included in the scheme. Generally speaking, it includes any asset that is expected to decline in value and only has an expected useful life span.
The assets can be new or used (providing your business has an aggregated turnover of less than $50 million), but they must be used for business purposes.
You can claim assets such as:
- Light and heavy commercial vehicles
- Equipment and machinery
- Earthmoving and construction equipment
- Business vehicles
- Manufacturing and industrial equipment
There is also no limit on how many assets you can write off. Therefore, if you buy 4 new vans to add to your fleet, you can deduct all 4 in the year that you purchase them.
If the asset is to be used for both business and personal use, you can only claim for the portion that will be used for business purposes. For example, if you purchase a work Ute for $50,000 but will only use it for businesses purposes 50 per cent of the time, you can only claim a deduction of $25,000.
When taking into consideration the cost of an item, it includes the initial purchase prices plus any additional costs involved in transporting and setting it up for business use.
The ATO has identified certain assets which are ineligible for the scheme (but can still be deducted using other methods) such as:
- Assets allocated to a low-value pool (generally costing less than $1,000) or a software development pool
- Primary production assets, such as horticulture plants, water facilities or fencing
- Building and other capital works
- Assets not located in Australia
Case Study: Tom owns a building business called TBC Pty Ltd. TBC Pty Ltd has an annual aggregated turnover of $20 million and during the 2021-22 financial year they purchased the following assets:
- A second-hand Fuso Canter Truck worth $70,000
- A new Toyota Hilux Dual Cab Ute worth $50,000
During the 2021-22 financial year, TBC Pty Ltd will be able to deduct the full cost of both the Fuso Canter Truck and the Toyota Hilux Dual Cab Ute under the temporary full expensing scheme.
In total, TBC Pty Ltd can claim $120,000 in depreciation during the 2021-22 financial year.
If your business is ready to purchase a new asset or upgrade your existing ones, Morris Finance can assist you in obtaining finance to take advantage of the temporary full expensing scheme.