Budget 2020 – Writing off Depreciable Assets

One of the key measures in the recent Federal Budget was in relation to the treatment of business depreciable assets and when these can be written off.

The date by which an entity must first use or instal ready for use an asset acquired  by   31 December 2020 in order to claim the existing instant asset write off (IAWO) has been extended by six months to 30 June 2021. This extension does not change the requirement that the asset must be acquired by 31 December 2020.

A new measure allows businesses with an aggregated turnover of less than $5 billion to fully expense a depreciating asset (FEDA) the entity starts to hold from 7:30pm on 6 October 2020, provided it is first used or installed ready for use by 30 June 2022.

For a small business entity (turnover less than $10M) the table below sets out the most likely various relevant dates and threshholds for instant claims:

Date asset acquired (IAWO) or first held (FEDA)  

Date asset first used or installed ready for use

 

 

 

IAWO:

Small business entity

< $10m

Before 7:30pm on 12 May 2015

 

Before 7:30pm on 12 May 2015 <$1,000
Acquired from 7:30pm on

12 May 2015 to

31 December 2020

7:30pm on 12 May 2015 to before 29 January 2019

29 January 2019 to before 7:30pm on 2 April 2019

7:30pm on 2 April 2019 to before 12 March 2020

12 March 2020 to 30 June 2021

<$20,000

<$25,000

 

<$30,000

<$150,000

From 1 January

2021

 

Practically, not relevant until after 30 June 2022

 

<$1,000

FEDA:

All businesses

< $50m

From 7:30pm on 6 October 2020 By 30 June 2022

 

No limit

 

Some key points to note:

  • The requirement to fully expense the asset may result in some entities making a loss.
  • Car limit still applies ($59,136 for 2020–21).
  • Small business entities must write off their general small business pools if the low pool value meets the prescribed conditions.
  • Certain assets are excluded, such as buildings, Div 43 capital works, assets allocated to low- value pools and software development pools under Subdiv 40-E, certain primary production assets covered by Subdiv 40-F, and assets used or located outside.
  • When the asset is sold later, any proceeds received will likely result in a profit and be taxable to the entity.

For more information regarding these measures or for businesses with turnover in excess of $10M, please contact Stacey or Ross at Astro Tax and/or review the infographic below

Expensing Depreciable Assets – Infographic

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