Temporary full expensing has been extended until 30 June 2023. This is a welcome tax relief for small businesses and has been extended as a result of COVID-19 and the impact it has had on businesses across Australia.
Discover if you are eligible and how you, as a small business, can make the most of the expansion into the new financial year.*
What is temporary full expensing.
Temporary full expensing is a relatively new addition to small business tax deductions. The measure was implemented by the Australian government in 2020 as a result of COVID-19 and its impact on the economy.
The measure, which has been expanded into the 2022-2023 financial year and budget, allows businesses who meet certain eligibility criteria to deduct the full cost of any valued, depreciating asset. The caveat is that this must be in the first year they are used or installed.
In terms of current assets, the measure, and deduction, also applies to the cost of improving eligible assets.
Who and what is eligible for temporary full expensing.
The temporary full expensing tax relief measure is applicable for a range of businesses and eligibility is in two streams, with slight nuances.
One is for a business aggregated turnover of less than $5 billion and the other is for businesses with an aggregated turnover of less than $50 million. For those businesses with an aggregated turnover of more than $5 billion, there are other measures in place.
In terms of those with aggregated turnover of less than $5 billion and an aggregated turnover of less than $50 million, new assets that are first bought, used or installed within the period of October 2020 and 30 June 2023 are eligible.
Businesses can also deduct the cost of improving existing assets within this time period.
A caveat for businesses with an aggregated turnover of less than $50 million is that deductions can also be made for second-hand assets, which is particularly helpful for smaller businesses.
In terms of what assets are eligible, you can claim the cost of an eligible asset that is required for your business to run, such as computers, manufacturing equipment, vehicles or tools.
How to claim for temporary full expensing.
Claiming a temporary full expensing deduction is possible in your 2022-2023 tax return. The Australian Taxation Office will be updating the various details and instructions regarding how to claim. You can simply add the details to your small business tax return and then lodge as you usually do.
It’s worth noting that there are opt out options for the deduction, should you prefer to utilise other depreciation methods.
What temporary full expensing means for your business?
Temporary full expensing is available to most businesses and provides a welcome tax relief to assist in balancing the impact of COVID-19.
If you are eligible, it is worth talking to your accountant and making the most of the measure while it is still in place.
*We endeavour to provide accurate material for Australian businesses consistent with Australian laws; however, this material is for reference only and is not designed to be, nor should it be regarded as professional advice.
