About the Government's Temporary Full Expensing Offer

What is the Temporary Full Expensing Offer? 

Previously known as the Instant Asset Write Off program, this initiative allows small businesses with a turnover of less than $5 billion to claim immediate tax deductions when buying new or second-hand equipment.
 
This allows eligible businesses to obtain capital assets and get an immediate tax decuction, with the aim of providing additional support for Australian businesses and encouraging new investments. Essentially this is a fantastic incentive set on by the Australian Government to assist in bringing manufacturing back to Australia. 
 

Key Points:  

The expanded Full Instant Write-Off on any new eligible asset is available to 30 June 2023. There is NO limit to the purchase price to be eligible (previous $150,000 limit has been removed).
 
Now classified as “Temporary Full Expensing” the update was announced in the October 2020 Budget. This is an extraordinary opportunity whereby customers can finance their purchase, improve their profits, and dramatically reduce their company tax payable in the future. 
 

How can this benefit me? 

Simply put, if your assets qualify for an immediate tax write-off, it allows you to reduce your taxable income the year that the asset is first used for or installed ready for use. (Previously deductions had to be claimed over several years.) 
 
For example; John Smith's engineering fabrication business has an aggregated income of $18 million for the 2020-21 financial year. In November 2020, his company purchases a customised Flow Mach 100 Waterjet package for $200,000 to allow them to increase their production and expand into new markets. The machine is installed and comissioned in March 2021. Because the machine has been purchased and installed before 30 June 2021 and their turnover is less than $5 billion, they deduct the full cost of the waterjet system (i.e. $200,000) in their 2020-21 tax return. 
 

Taxation Ruling

Previous

New Rules

Asset Purchase

$200,000.00

$200,000.00

Instant Asset Write-off

 

-$200,000.00

Depreciation 10%

-$20,000.00

 

Corporate Tax at 26%, reduced by

-$5,200.00

-$52,000.00

 

By providing this facility the government is essentially providing your business with an opportunity to reduce your tax substantially if you invest in new machinery.
 

 

Want to know more? 

For more information on the temporary full expensing offer, read more on the Government's website here: https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/General-depreciation-rules---capital-allowances/Temporary-full-expensing/ 
 
 
Disclaimer: Always consult with a qualified accountant or financial advisor before making decisions regarding Temporary Full Expensing Claims. It is essential to have an understanding of how acquisition of large purchases will affect your cash flow position.