Instant Asset Write Off – Ending Soon

If you are looking to purchase new gear, you’re encouraged to chat to a finance brokers and accountants on how to best take advantage of the government tax incentives – writes Miles Beamish, Senior Partner at Finlease.

With these ending in just under six months, there’s potential for businesses to see significant savings with some strategic planning.

Temporary full expensing of depreciating assets (TFEDA)

The Government will support businesses by enabling them to deduct the full cost of eligible capital assets acquired from 7:30pm AEDT on 6 October 2020 (Budget night) and first used or installed by 30 June 2023.

Full expensing in the year of first use will apply to new depreciable assets and the cost of improvements to existing eligible assets. For SMEs (with turnover less than $50 million per annum), full expensing also applies to second- hand assets (See Table 1 below).

Small businesses (turnover less than $10 million per annum) can deduct the balance of their simplified depreciation pool at the end of 2021, 2022 and/or 2023. The provisions which prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out, will continue to be suspended.

Table 2 below is a simple table and summary of the Loss Carry Back opportunities, as announced in the Federal Government’s 2020 Budget.

Temporary Loss “Carry Back” opportunities

The Government will allow eligible companies to carry back tax losses from the 2019-20, 202021, 2021-22 or 2022-23 income years to offset previously taxed profits in years later than 2018-19. Corporate tax entities with turnover less than $5 billion per annum can apply tax losses against taxed profits in a previous year, generating a refundable tax offset in the year in which the loss is made. The tax refund would be limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carry back does not generate a franking account deficit.

The tax refund will be available on election by eligible businesses when they lodge their tax returns for 2020-21, 2021-22 and 2022-23 income years.

Currently, companies are required to carry losses forward to offset profits in future years. Companies that do not elect to carry back losses under this measure can still carry losses forward as normal.

To simplify and provide clarity, a conversation with your finance broker and accountant could certainly benefit those making capital purchases in the near future.

Up to $50 million to $5 billion

Up to $50 million

MUST BE A CORPORATE TAX ENTITY TO ELIGIBLE

(ie. excludes Sole Traders, most partnerships & Trusts)