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In an effort to address the economic consequences brought about by coronavirus, the previous Australian government introduced various economic stimulus measures to support businesses through the pandemic.
Temporary full expensing was one such measure and was introduced to encourage investment by allowing businesses to maximise their tax deductions by claiming accelerated depreciation for eligible assets. This measure is now coming to an end and businesses need to start planning now to receive its tax benefits.
Under temporary full expensing, an immediate deduction is available for eligible assets that are first used or installed ready for use for a taxable purpose between 6 October 2020 and 30 June 2023.
Since the coronavirus pandemic began, many industries have experienced supply chain delays. These delays have postponed the delivery of assets used by businesses and new pieces of machinery, motor vehicles, etc are taking extra time to be delivered. These delays could therefore impact the eligibility of a business to claim an immediate deduction before the 30th June 2023, which is also the end date for temporary full expensing.
Businesses should be planning now for their capital purchases, especially if an immediate deduction is being sought for the purchase.
It’s important to remember that to claim an immediate deduction, eligible assets must be first used or installed ready for use by the 30th June 2023. Placing a purchase order or prepaying the purchase cost before 30th June 2023 is not sufficient to be eligible to claim an immediate deduction. The asset must be installed and ready for use in the business.
At this stage, there is no news on whether the temporary full expensing measures will be extended past the 30 June 2023, however considering the current economic environment, it appears to be unlikely that the government will extend any stimulus measures.
In addition to temporary full expensing, there are several alternative depreciation methods that will continue to be available. Different accelerated write offs are also available for primary producers for assets such as fencing, water assets and fodder storage. Each claim has its own advantages and disadvantages. To work out which is right for your circumstances, please feel free to reach out to one of the tax experts at HHH Partners.