Edited version of private advice

Authorisation Number: 1052154261151

Date of advice: 14 August 2023

Ruling

Subject: Temporary full expensing and depreciation

Question

Will the Commissioner allow you to claim a deduction under Subdivision 40-BB of the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A), known as temporary full expensing, in the 202X-2X income tax year for an eligible asset that was held or installed ready for use in the 202Y-2Y income tax year?

Answer

No. Under the general depreciation provisions, you are entitled to claim a deduction for the decline in value for an income tax year of a depreciating asset that you held for any time during the year. You are entitled to also claim the deduction when you first use it or have it installed ready for use.

The government tax initiative known as Temporary Full Expensing (TFE) was available for eligible entities from 7.30pm AEDT 6 October 2020 to 30 June 2023. TFE supported business and encouraged investment as eligible entities can claim an immediate deduction for the business portion of the cost of an eligible asset in the year it is first used or installed ready for use for a taxable purpose.

An eligible entity for TFE was either a business with an aggregate turnover of less than $5 billion or a corporate tax entity that met the alternative income test.

Broadly, to be an eligible asset for TFE, the depreciating asset must be:

•                     new or second-hand (if it is a second-hand asset, your aggregate turnover is below $50 million)

•                     first held by you at or after 7.30pm AEDT on 6 October 2020

•                     first used or installed ready for use by you for a taxable purpose (such as a business purpose) between 7.30pm AEDT on 6 October 2020 and 30 June 2023

Note: there are exclusions

The Commissioner does not have the discretion to allow a taxpayer to claim a deduction under the depreciation or TFE provisions in an earlier year before the taxpayer holds the depreciating asset or the depreciating asset is first used or installed ready for use.

In your case, under Subdivision 40-BB of the IT(TP)A, you are not entitled to claim a deduction for your depreciating asset in the 202X-2X income tax year because you did not hold the depreciating asset or it was not first used or installed ready for use by you for a taxable purpose until the 202Y-2Y income tax year.

This ruling applies for the following period:

Year ended 30 June 202X

The scheme commenced on:

1 July 202X

Relevant facts and circumstances

You disposed of the majority of your plant and equipment during the 202X-2X income tax year.

In June 202X you acquired a depreciating asset from your supplier.

You were expecting delivery of the depreciating asset by 30 June 202X.

The depreciating asset you acquired was placed into quarantine.

You had paid for the depreciating asset prior to 30 June 202X.

You advised the tractor was delivered to you after 30 June 202X.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 40-25

Income Tax Assessment Act 1997 subsection 40-25(1)

Income Tax Assessment Act 1997 subsection 40-25(2)

Income Tax Assessment Act 1997 subsection 40-25(7)

Income Tax Assessment Act 1997 section 40-60

Income Tax Assessment Act 1997 subsection 40-60(1)

Income Tax Assessment Act 1997 subsection 40-60(2)

Income Tax (Transitional Provisions) Act 1997 Subdivision 40-BB

Income Tax (Transitional Provisions) Act 1997 section 40-150

Income Tax (Transitional Provisions) Act 1997 subsection 40-150 (1)

Income Tax (Transitional Provisions) Act 1997 subsections 40-150(2)

Income Tax (Transitional Provisions) Act 1997 subsection 40-150(3)

Income Tax (Transitional Provisions) Act 1997 subsection 40-150(4)

Income Tax (Transitional Provisions) Act 1997 section 40-155

Income Tax (Transitional Provisions) Act 1997 section 40-157

Income Tax (Transitional Provisions) Act 1997 subsection 40-160(1)