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The Government has enhanced instant asset write-off rules to support businesses investment, lowering taxes by an estimated $3.2 billion over the next two years.
Businesses with an aggregated annual turnover less than $5 billion
The Government will support businesses with aggregated annual turnover of less than
$5 billion by enabling them to deduct the full cost of eligible capital assets acquired from
7:30pm AEDT on 6 October 2020 (Budget night) and first used or installed by
30 June 2022.
Full expensing in the year of first use will apply to new depreciable assets and the cost
of improvements to existing eligible assets.
Businesses with an aggregated annual turnover between $50 million to $500 million
On 12 March 2020, the Government announced that it would increase the instant asset write-off threshold to $150,000 (up from $30,000) and expand access to include businesses with an aggregated annual turnover of less than $500 million (up from
$50 million) until 30 June 2020. This was later extended to 31 December 2020.
Businesses can still deduct the full cost of eligible second-hand assets costing less than $150,000 that are purchased by 31 December 2020.
Businesses that hold assets eligible for the enhanced $150,000 instant asset write-off will have an extra six months, until 30 June 2021, to first use or install those assets.
Around 3.5 million businesses with aggregated annual turnover of less than $500 million are eligible to access the $150,000 instant asset write-off.
“It will dramatically expand the productive capacity of the nation and create tens of thousands of jobs,” said the Treasurer.
“Small businesses will buy, sell, deliver, install, and service these purchases.”
The threshold applies on a per asset basis, so eligible businesses can instantly write-off multiple assets.
Businesses with an aggregated annual turnover less than $50 mn
Full expensing also applies to second-hand assets.
Businesses with an aggregated annual turnover of less than $10 mn
Small businesses can deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies. The provisions which prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended.
Companies that have been struggling will also be able to use their losses earlier.
“Losses incurred to June 2022 can be offset against prior profits made in or after the 2018‑19 financial year,” said the Treasurer.
“The combination of the immediate expensing and loss carry-back measures will create an additional 50,000 jobs across the country.”
These measures, combined with the Government’s proposed reforms to insolvency and credit laws, aim to help Australian businesses get back to profitability and keep people employed.
The new investment allowance is likely to receive the support of the Labor opposition, which took a policy of a 20 per cent investment allowance on new assets over $20,000 to the last election.
The Business Council of Australia (BCA) proposed a similar 20 per cent investment allowance in a pre-budget submission.
The BCA estimated such an allowance, if offered to all businesses, would create 500,000 new jobs and encourage $200 billion in investment over the next decade, at a cost of $10 billion to the budget bottom line.