Businesses have less than four months to take advantage of the Temporary Full Expensing (TFE) measure introduced to bolster economic growth during the COVID-19 pandemic. The temporary measure ceases on 30 June 2023.
Broadly, businesses have been able to elect to use TFE to write off the cost of new assets, reducing their taxable income accordingly. This brings forward depreciation deductions that would have otherwise been required to be taken over the useful life of an asset.
The TFE conditions allow small and medium businesses to deduct the full cost of new and second-hand assets. The TFE conditions for immediate deduction are as follows:
|Eligible business aggregated turnover||Condition
|Date range – first used or installed||Asset cost
|Less than $5 billion||New assets||7 October 2020 to 30 June 2023||Unlimited|
|Less than $50 million||New or second-hand assets||7 October 2020 to 30 June 2023||Unlimited|
What happens after 30 June?
With the expiry of TFE at 30 June, assets acquired from the 2024 financial year onwards will be subject to the prior tax depreciation rules. From 1 July 2023, the instant asset write-off will be severely limited.
From 1 July 2023 onwards, only small businesses with a turnover below $10m will be able to make use of the instant asset write-off. The relevant cost threshold for these assets is due to be reduced to $1,000, bringing an end to the deduction bonanza.
If you would like assistance with tax planning and the possible application of the abovementioned COVID-19 relief measures please contact Kylee Smith, Tom Howard or your Pilot advisor on (07) 3023 1300.