The recent budget has delivered on several incentives for small businesses. One of the major announcements was an extension of Temporary Full Expensing measures until the 30th of June 2023.
What does this mean for small business owners?
Deciding when to invest in new equipment can be tricky at the best of times and could have a big impact on cash flow. However, now that the government's Temporary Full Expensing measures have been extended, now may be the best time to invest in new assets for your business.
What is Temporary Full Expensing?
Temporary Full Expensing is an accelerated depreciation measure, which allows businesses to take a tax deduction upfront for the full cost of the assets in the financial year they were purchased and installed.
Before this was introduced, it was only possible to claim a tax deduction for the cost over the effective life of the asset, which is typically over several years. By deducting the full expense in one year, you can decrease your taxable income and the amount of tax payable sooner, delivering an immediate cash-flow benefit to your business.
This measure is for businesses with an annual revenue of up to $5 billion. There is no limit on the number or value of assets that can be claimed. If your annual revenue is $50 million or under then you can also apply this measure to the cost of eligible second-hand assets.
How does Temporary Full Expensing work?
If you are an eligible business, when you purchase any eligible new or second-hand depreciable assets, or pay for improvements to existing eligible assets, you can claim the full cost of the asset as a deduction on your 2020–21 or 2021–22 business tax return. This will reduce your taxable income and therefore the amount of tax you pay in that year.
What assets are eligible?
Eligible depreciable assets include:
- Vehicles (up to the business car limit where applicable);
- Plant and equipment;
- Office furniture and fittings;
- Computers, phones, externally purchased software; and
- Some components of office fit-outs.
The asset must be purchased and installed ready for use between October 6th 2020 (after 7.30pm) and June 30th 2023, in order to qualify for the immediate depreciation treatment.
If you believe your business could benefit from this measure, have a chat with your accountant or bookkeeper.
Here at Bookkeeping solutions we have consultants with many years of small business experience that can guide you towards making the right choice for your business. For a free consultation book an appointment or call
1300 089 139.