The Federal Government has announced its intention to extend the temporary measure to allow businesses to claim a deduction for the full cost of eligible capital assets, which may be relevant to the purchase of a new or used motor vehicle.
BDO has prepared this information to help you, the customer, evaluate eligibility to this incentive.
Temporary full expensing of capital assets
Businesses with an aggregated annual turnover of less than $5 billion (for new assets), or $50 million (for used assets), will be able to deduct the full cost of eligible capital assets acquired from 7:30pm AEDT on 6 October 2020 and first used or installed by 30 June 2023.
Implications of the measure within the above timeframe are as follows:
- Businesses with annual aggregated turnover of less than $5 billion will be entitled to an immediate tax deduction on eligible new capital assets.
- Businesses with annual aggregated turnover of less than $50 million will be entitled to an immediate tax deduction on eligible new and used capital assets.
What is the tax benefit?
An eligible business will be able to accelerate tax deduction for depreciation for assets. The measure generously removes the $150,000 instant asset write off limit to instead apply to capital assets of any cost price (subject to eligibility and business use).
For the income tax year ended 30 June 2023, the income tax rates applicable for companies with annual aggregated turnover of less than $50 million and having 80% or less of its assessable income as base rate entity passive income is 25% and for companies with aggregated turnover of greater than $50 million, 30%.
You are a business entity with aggregated turnover of less than $5 billion and registered for GST.
The entity purchases new or used equipment with a GST inclusive value of any amount.
The equipment is first used or installed by 30 June 2023.
The equipment is used 100% for business purposes.
Your business will be entitled to an immediate depreciation deduction of the full value.
The ability to claim accelerated depreciation on eligible equipment offers an excellent tax incentive for small, medium and large businesses.
Please note this information is general in nature and should not be used as a substitute for your own professional advice. Any tax benefit that may be available will be subject to your own circumstances.