# ATO: Temporary full expensing



## Jack Malarkey (Jan 11, 2016)

This announcement is relevant to optional immediate deductibility for the purchase of new and second-hand cars and other depreciating assets through to 30 June 2022 [later extended to 30 June 2023].

Australian Taxation Office (22 December 2020)

(Emphasis added)

https://www.ato.gov.au/General/New-...ull-expensing-to-support-investment-and-jobs/
[HEADING=2]JobMaker Plan - temporary full expensing to support investment and jobs[/HEADING]
On 6 October 2020, as part of the 2020-21 Budget, the government announced it will support businesses and encourage new investment, through a temporary full expensing incentive. This measure is now law.

*Businesses with an aggregated turnover of less than $5 billion can immediately deduct the business portion of the cost of new eligible depreciating assets*. Corporate tax entities unable to meet the $5 billion turnover test can still be eligible for temporary full expensing under an alternative test. *The eligible new assets must be first held and first used, or installed ready for use for a taxable purpose, between 7:30pm AEDT on 6 October 2020 and 30 June 2022.

For businesses with an aggregated turnover of less than $50 million, temporary full expensing also applies to the business portion of eligible second-hand depreciating assets.

Businesses can also deduct the business portion of the cost of improvements to eligible depreciating assets (and assets acquired before 7.30pm AEDT on 6 October 2020 that would otherwise be eligible assets) if those costs are incurred between 7.30pm AEDT on 6 October 2020 and 30 June 2022.

Businesses can choose not to apply temporary full expensing on an asset-by-asset basis.

The measure also extends the time by which assets that qualify for the existing enhanced instant asset write-off incentive that applies to small and medium sized businesses. These assets must be first used or installed ready for use for a taxable purpose by 6 months, to 30 June 2021.*

Small businesses (with aggregated turnover of less than $10 million) choosing to apply simplified depreciation rules can deduct the balance of their general small business pool for income years ending between 6 October 2020 and 30 June 2022. The 'lock out' rules that prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out of the regime are suspended until 30 June 2022.

[HEADING=2]More information[/HEADING]

Temporary full expensing
Budget Paper No.2: Budget Measures, Part 1 - Receipt Measures, page 20External Link
Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Act 2020External Link (Act No. 92 of 2020)

*Jack Malarkey comments:*

The car depreciation limit ($59,136 for 2020-21) still applies.


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## Jack Malarkey (Jan 11, 2016)

The important thing from all of this is that drivers can obtain an optional immediate writeoff for purchases of new or second-hand depreciating assets (including cars) for purchases up to 30 June 2022.

Two separate measures achieve this result: (1) the instant asset write-off; and (2) the full expensing measure.

The results under the two measures are exactly the same: an optional immediate deduction.

For the instant asset write-off, you do need to have made the purchase by 31 December 2020.

But the full expensing measure applies to purchases from 6 October 2020 to 30 June 2022. If you are eligible under both measures, you can still only claim one deduction and not two.

So someone purchasing now would need to use the full expensing measure. The result is exactly the same as under the instant asset write-off.

See:

[HEADING=2]Instant asset write-off[/HEADING]
Eligible businesses can use instant asset write-off to claim a deduction for the cost of purchasing most business assets. Find out if your business is eligible.







www.ato.gov.au

It's a little confusing how the Government has done this given that there is some overlap between the measures but the result is good.


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## Jack Malarkey (Jan 11, 2016)

Before claiming the instant asset write-off or the new full expensing measure to 30 June 2022, it's important to do some quick calculations to ensure it's advantageous for you to do so: it isn't always.

Take, for example, a driver with a taxable income (excluding depreciation) of $55,000 per year who purchases a car costing $45,000 in the 2020-21 income year.

By claiming the $45,000 as $9,000 a year over five years, the driver will have a total tax saving (including Medicare levy) over the five years of about $15,525.

But the same driver claiming all of the $45,000 as the instant asset write-off or the new full expensing measure will have a tax saving of about $9,078 (or $6,447 less).

By claiming over five years, this driver saves 34.5 cents in the dollar but by claiming the instant asset write-off or the new full expensing measure saves a combination of 34.5 cents, 21 cents and nil cents in the dollar in tax.

Also be careful if your assessable income (ie, gross income subject to tax) from rideshare is under $20,000 and claiming the instant asset write-off or the new full expensing measure would create or increase a net business loss.

In these circumstances, the non-commercial losses rules would be likely to prevent you from offsetting the loss against other income and oblige you to quarantine it for offset against business income in future years.

(Jobkeeper payment for a business participant counts as business income and counts towards the $20,000 threshold.)

Individual income tax rates

These rates show the amount of tax payable in every dollar for each income bracket for individual taxpayers.

Non-commercial losses


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## Jack Malarkey (Jan 11, 2016)

An important feature of the new temporary full expensing measure is that it excludes depreciating assets 'that will not be used principally in Australia for the principal purpose of carrying on a business'.

This means that if you acquire the car or other depreciating asset principally for non-business purposes (for example, as the family car), you won't be able to claim any depreciation (not even the business proportion) under the temporary full expensing measure and will need to claim depreciation by other means.

The instant asset write-off doesn't have a comparable exclusion. The instant asset write-off, however, is available only for assets acquired up to 31 December 2020. (The time by which the asset must be relevantly used has been extended by six months to 30 June 2021.)

What all of this means is that immediate deductibility is now only available for depreciating assets acquired after 31 December 2020 if they are used principally for business purposes.

[HEADING=2]Temporary full expensing[/HEADING]
Businesses may be able to use temporary full expensing to claim an immediate deduction for the cost of eligible assets and improvements to existing assets, in their 2020-21 and 2021-22 income years.







www.ato.gov.au


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## Sandhills (Feb 9, 2018)

you know I was sitting here scratching thinking is it worth going onto Uber poodles.com a great site for ridesharing poodles ( big in Saudi ) anyways Jack once again you have provided something more useful than a chocolate Ganesh croissant ( these are so good that i let riders eat them in the car then shake the car mats hoping for a few crumbs ...insert fava beans sound here)

so I guess will buy a new car and in honour of your 90 cubic centimetre brain case change the badges from Suzuki Swift to 'Malarkey Mobile' :thumbup::biggrin:

onya Jack


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## Jack Malarkey (Jan 11, 2016)

2020-21 Budget:

Temporary full expensing now to apply to 30 June 2023 (rather than 2022).


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## Jack Malarkey (Jan 11, 2016)

Australian Taxation Office:









Interaction of tax depreciation incentives


The information on this page is a guide to tax depreciation incentives and when businesses could consider using them.




www.ato.gov.au






*Interaction of tax depreciation incentives*

In 2020 the government introduced measures to help businesses recover from the impacts of the coronavirus pandemic (COVID-19).
Eligible business entities may be looking at which tax depreciation incentive is right for them.

Only one incentive can apply for an asset. If more than one incentive could apply to an asset the order of application is (subject to opt out choices):

Temporary full expensing
Instant asset write-off
Backing business investment
General depreciation rules
Note: as part of the Budget 2021–22, temporary full expensing is to be extended for another year. The measures announced as part of the Budget are not yet law. We will update this content once the extension is law.

We have prepared a high-level snapshot to help you work out how these incentives may apply to you.

Next steps:

Download the PDF version of the Interaction of tax depreciation incentives (PDF, 1.1MB)This link will download a file, or
View the text version of the Interaction of tax depreciation incentives.


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## Sandhills (Feb 9, 2018)

Thanks Jack this is one thread worth bookmarking and following...

Just got finance for a car so need to get it in action this financial year 

Tax savings are interesting one must also factor in the time value of money (opportunity cost) and inflation to get a true picture but that's a tangential point to what this discussion is about

For example it may benefit you to take a 9k reduction in tax this year rather than 15k over 5 years because U can make more than that 6k back over the next 5 years or inflation could be so bad in 5 years time the real value of that 6k more has reduced


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