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