Incentives for business investment.
The federal government has handed down its 2020-21 budget, with it including a number of measures designed to fuel business investment, building on the enhanced instant asset write-off, originally introduced earlier in the year in response to the COVID-19 pandemic. This has seen the introduction of temporary full expensing, which the government advises allows businesses with a turnover up to $5 billion to deduct the full cost of eligible depreciable assets of any value in the year they are first used or installed ready for use. In assessing your business’s equipment needs, and weighing up the right time to make new investments, it is certainly worthwhile keeping these incentives inmind and how they can be harnessed to deliver financial benefits.
WHAT IS TEMPORARY FULL EXPENSING?
Temporary full expensing has been introduced to support business investment and job creation, with the initiative now underway following its announcement in the budget and set to run through to mid-2022. The government advises that temporary full expensing will be available to around 3.5 million businesses (making up over 99 per cent of businesses), employing around 11.5 million workers. The ATO website provides the following information about temporary full expensing:
• Eligible businesses with an aggregated turnover of less than $5 billion can deduct the full cost of new eligible depreciating assets first held, and first used or installed ready for use for a taxable purpose, between October 6, 2020 (7:30pm AEDT) and June 30, 2022
• For small and medium-sized businesses (aggregated turnover of less than $50 million), it also applies to eligible secondhand assets
• Businesses can also deduct the full cost of improvements made during this period to depreciating assets, whether they were acquired before or after the 2020 budget time
• Small businesses (aggregated turnover of less than $10 million) can deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies (with provisions preventing small businesses from re-entering the simplified depreciation regime for five years if they opt out of the regime continuing to be suspended). Of course, when it comes to new equipment purchases, it is important to weigh up the full range of options available for your business, and to keep up to speed with any new developments, seeking out expert advice when required. Further information can be found at the ATO website (www.ato.gov.au) and the www.budget.gov.au website.
INSTANT ASSET WRITE-OFF
The government had previously increased the instant asset write-off threshold, along with expanding business access, and had subsequently advised that it would extend these measures for a further six months through to December 31, 2020. Changes to the instant asset write-off threshold saw it increased from $30,000 to $150,000, and expanded to include businesses with an aggregated annual turnover of less than $500 million (up from $50 million). As part of its budget measures, the government has advised that eligible businesses that acquired eligible new or second-hand assets under the enhanced instant asset write-off by December 31 will also have an extra six months, until June 30, 2021, to first use or install those assets. ACM