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  • 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.

    We have now released draft LCR 2021/D1 for consultation. Topics covered in the draft 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
    • guidance on how temporary full expensing applies to small businesses
    • the interaction of temporary full expensing with the tax consolidation rules.

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    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 and 2021–22 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 2022
    • eligible second-hand assets where both of the following apply
      • 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 2022.
      • The eligible entity’s aggregated turnover is less than $50 million.
       
    • improvements incurred between 7.30pm AEDT on 6 October 2020 and 30 June 2022 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.

    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.

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    Next step:

    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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    Last modified: 15 Jul 2021QC 64428