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Immediate full expensing of eligible new depreciating assets

Businesses with an aggregated turnover of less than $5 billion can immediately deduct the business portion of the cost of eligible new depreciating assets. Corporate tax entities unable to meet the $5 billion turnover test may still be eligible for temporary full expensing under the alternative income test. The eligible new assets must be first held, and first used or installed ready for use for a taxable purpose, between 7.30pm AEDT on 6 October 2020 and 30 June 2022.

For businesses with an aggregated turnover of less than $50 million, temporary full expensing also applies to the business portion of eligible second-hand depreciating assets.

Businesses can also immediately deduct the business portion of the cost of improvements to eligible depreciating assets (and to assets acquired before 7.30pm AEDT on 6 October 2020 that would otherwise be eligible assets) if those costs are incurred between 7.30pm AEDT on 6 October 2020 and 30 June 2022.

You can make a choice to opt-out of temporary full expensing for an income year on an asset-by-asset basis if you are not using the simplified depreciation rules.

If you are a small business that chooses to use the simplified depreciation rules, you apply the temporary full expensing rules with some modifications. This includes deducting the balance of your small business pool at the end of an income year ending between 6 October 2020 and 30 June 2022.

Eligible businesses

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Businesses can access temporary full expensing if their aggregated turnover is less than $5 billion.

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.

Corporate tax entities that do not meet the $5 billion aggregated turnover test can access temporary full expensing if they satisfy the alternative income test.

Businesses can claim the deduction when lodging their 2020–21 or 2021–22 tax return (as applicable).

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 2022.

Exclusions

Eligible assets do not 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), unless you are a small business entity who chooses to use the simplified depreciation rules to these assets
  • buildings and other capital works for which you can deduct amounts under Division 43
  • assets that either
    • will never be located in Australia
    • will not be used principally in Australia for the principal purpose of carrying on a business.
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