Edited version of private advice

Authorisation Number: 1052205739155

Date of advice: 22 December 2023

Ruling

Subject: Capital allowances - immediately deductible expenditure

Question 1

Will the purchase of the assets qualify for Temporary Full Expensing (TFE) under Subdivision 40-BB of the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A 1997)?

Answer

Yes.

This ruling applies for the following period(s)

Income Year Ended 30 June 202x

The scheme commences on

X Date

Relevant facts and circumstances

X Pty Ltd (X) operates a business.

Turnover in the relevant financial year was below $XXm.

X purchased assets in the income year ending 30 June 202x and wishes to claim a deduction under the TFE rules for those assets in the income year ending 30 June 202X.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 40-40

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

Reasons for decision

Summary

The purchase of the assets will qualify for TFE under Subdivision 40-BB of the IT(TP)A 1997.

Detailed reasoning

Subsection 40-150(1) IT(TP)A 1997 contains the Temporary full expensing of depreciating assets measures.

Entities may be eligible for Temporary Full Expensing (TFE) if they 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.

The rules for calculating aggregated turnover are the same as those used for the small business entity concessions. Businesses who are eligible claim a deduction when lodging their 2020-21, 2021-22, or 2022-23 tax returns.

To be an eligible asset for TFE, if the depreciating asset is a second-hand asset, the aggregated turnover must be below $50 million.

To be eligible for a claim under the TFE measures a taxpayer needs to be the holder of an asset in addition to using the asset, or having it installed ready for use, for a taxable purpose (Subsection 40-150(1) of the IT(TP)A1997 and Paragraph 8.12 of the Explanatory Memorandum (EM) to the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020).

Subdivision 40-BB of the IT(IP)A 1997 contains the TFE of depreciating assets measures. Subsection 40-150(1) provides that you are covered by division 40 for a depreciating asset if, on or before 30 June 2023:

(a) you start to hold the asset; and

(b) you start to use the asset, or have it installed ready for use, for a taxable purpose. (emphasis added)

Paragraph 8.12 of the EM to the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020 Chapter 8 - Temporary full expensing of depreciating assets states at 8.12 (underlining added):

8.12 Generally, to be eligible for the temporary full expensing incentive, a depreciating asset must be:

first held, and first used or installed ready for use for a taxable purpose, between the 2020 budget time and 30 June 2022; and

located in Australia and principally used in Australia for the principal purpose of carrying on a business.

Conclusion

X became the owner of these assets in 202x, and the requirements for TFE under Subdivision 40-BB of the IT(TP)A 1997 are satisfied. X is able to deduct the cost of these assets it acquired in the income year ending 30 June 202x.