The Temporary Full Expensing (TFE) incentive is coming to an end on 30 June 2023, and the Australian federal government has announced the return of the small business instant asset write-off.
Businesses with an aggregated turnover of less than $5 billion
The TFE rules allow businesses to claim a full deduction for the cost of eligible depreciating assets in the year they are first used, or installed ready for use, for a taxable purpose before 30 June 2023. Make sure to act now, as this tax incentive is set to expire at the end of the month.
Remember that assets must be installed or ready for use by 30 June 2023 to qualify for the full write-off. Simply entering into a contract to purchase or owning the asset is not enough.
If your business has a turnover of under $50 million, you can also claim the full write-off for second-hand assets.
Businesses with an aggregated turnover of less than $10 million
For small business entities using simplified depreciation, the instant asset write-off was set to revert to a $1,000 threshold until the reintroduction of the scheme was announced in the 2023-24 Federal Budget.
Starting from 1 July 2023, small businesses with an aggregated annual turnover of less than $10 million can immediately deduct the full cost of eligible assets for tax purposes.
To be eligible for the instant asset write-off next year, the asset must:
Be first installed or ready to use between 1 July 2023 and 30 June 2024.
Cost less than $20,000.
The $20,000 threshold applies per asset, so you can instantly write off multiple assets.
Car
The TFE can apply to the purchase of a 'car' provided it is principally used in carrying on a business. Note the amount able to be claimed is limited to the car limit, and the taxable purpose use of the car.
The car limit puts a cap on the cost of a car ie passenger vehicles (except motorcycles or similar vehicles) designed to carry a load of less than one tonne and fewer than 9 passengers. The annual car limit for 2022-23 is $64,741.
Opportunities
As the TFE incentive end date of 30 June 2023 approaches, consider investing in assets before this deadline to take advantage of the accelerated tax deductions.
However, if your business has a turnover under $10 million, purchasing assets after 30 June can still grant you a full write-off, as long as you stay under the $20,000 threshold.
Other taxpayers
For taxpayers not eligible for the instant asset write-off, from 1 July 2023, assets costing less than $1,000 can be allocated to a low value pool if the taxpayer elects to do so. Assets costing more than $1,000 will be subject to the general depreciation rules.
Not sure what to do?
Contact HelloLedger and we'll guide you through the best course of action available for your business. Don't miss out on these valuable tax incentives – act now to maximise your deductions!
This post was originally published / written by BOMA and has been updated for freshness, accuracy, and comprehensiveness.
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