Temporary full expensing
Temporary full expensing supports businesses and encourages investment, as eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year it is first used or installed ready for use for a taxable purpose.
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Guidance material – LCR 2021/3
We have now released Law Companion Ruling LCR 2021/3Temporary full expensing. Topics covered in the Law Companion Ruling include:
- the general operation of the temporary full expensing provisions
- the interaction of temporary full expensing with the existing instant asset write-off and backing business investment rules
- the interaction of temporary full expensing with other areas of income tax law, such as the tax consolidation rules, and
- guidance on how temporary full expensing applies to small businesses.
Overview of eligibility
You may be eligible for temporary full expensing if you are one of the following:
- a business with an aggregated turnover of less than $5 billion
- a corporate tax entity that meets the alternative income test.
For the 2020–21,2021–22 and 2022-23 income years, an eligible entity can claim in its tax return a deduction for the business portion of the cost of:
- eligible new assets first held, first used or installed ready for use for a taxable purpose between 7.30pm AEDT on 6 October 2020 and 30 June 2023
- eligible second-hand assets where both
- the asset was first held, first used or installed ready for use for a taxable purpose between 7.30pm AEDT on 6 October 2020 and 30 June 2023
- the eligible entity’s aggregated turnover is less than $50 million
- improvements incurred between 7.30pm AEDT on 6 October 2020 and 30 June 2023 to
- eligible assets
- existing assets that would be eligible assets except that they are held before 7.30pm AEDT on 6 October 2020
- eligible assets of small business entities using the simplified depreciation rules and the balance of their small business pool.
You can make a choice to opt out of temporary full expensing for an income year on an asset-by-asset basis if you are not using the simplified depreciation rules.
You must tell us your choice to opt out:
- in your tax return
- by the day you lodge your tax return for the income year to which the choice relates.
For more information, see Eligibility for temporary full expensing.
Interaction of tax depreciation incentives
Eligible businesses may want to know which tax depreciation incentive is right for them.
We have prepared a high-level snapshot to help you work out how temporary full expensing, instant asset write-off or backing business investment may apply to you. You can also listen to ATO Podcast Episode 32 – JobMaker Plan Part 2: Economic support measures.
Loss carry back
You might make a tax loss in an income year as a result of claiming an immediate deduction under temporary full expensing. If you are a corporate tax entity, instead of carrying the tax loss forward and using it to offset your future income, you can consider if you are eligible for a refundable tax offset under loss carry back.
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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.