Currently, your business is eligible to claim an outright deduction for the cost and installation of new and second-hand assets. The outright deduction is known as temporary full expensing.
Under the legislation enacted by the federal government, a business must hold and use a business asset before 30 June 2023 to qualify for temporary full expensing.
As your business is below the turnover limit of $50 million, you will qualify for temporary full expensing for both new and second-hand assets. This means that, unlike previous rules on instant asset write-offs, no limit applies to the cost of an asset under the temporary full expensing rules.
What the rules mean for your business
Any eligible new or second-hand assets purchased this year will be immediately written-off. Also, if you are using a small business depreciation pool for depreciation, the entire balance will also be written-off. Unfortunately, small businesses cannot “opt out” of the full expensing rules.
This large deduction may not be something you want to claim all at once and would rather smooth out over a number of years. Options available to you in this situation include leasing assets, rather than purchasing them, over the next couple of years.
Alternatively, we may reduce your income tax instalments accordingly so that you can adequately account for cash flow over the year.
Please contact us if you wish to discuss this further, including other options available for your business this year.