As the end of the financial year approaches, the temporary full expensing rules will be coming to an end. Considering this, we explore the options that are now available for small and medium businesses to optimise their tax deductions.
With the temporary full expensing (TFE) incentive due to end on 30 June 2023, the federal government has announced the reintroduction of the small business instant asset write-off.
Businesses with an aggregated turnover of less than $5 billion
The TFE rules provide for a full deduction to businesses for the cost of eligible depreciating assets in the year they are first used, or installed ready for use, for a taxable purpose before 30 June 2023.
You and your business must be mindful that this tax incentive is set to expire next month so you will need to act now to avoid missing out on the available full write-off.
Assets must be installed ready for use, or be first used, by 30 June 2023, merely entering into a contract to purchase or owning the asset is insufficient to qualify for the full write-off.
If your turnover is under $50 million, you can also get the full write-off for second-hand assets.
Businesses with an aggregated turnover of less than $10 million
For small business entities using simplified depreciation, the cost threshold of an asset for instant write-off was set to revert to $1,000 until a reintroduction of the instant asset write-off was announced in the 2023–24 Federal Budget.
As per the announcement, from 1 July 2023, small businesses with aggregated annual turnover of less than $10 million will be able to immediately deduct the full cost of eligible assets for tax purposes.
For you to be eligible to claim the instant asset write-off next year, the asset must:
The $20,000 threshold will apply on a per asset basis — this means that you will be able to instantly write-off multiple assets.
With the TFE incentive end date approaching on 30 June 2023, you and your business should consider investing in assets before 30 June 2023 to avail the TFE accelerated tax deductions.
However, if your business’ turnover is under $10 million, making an asset purchase after 30 June can still get you a full write-off, if you stay under the $20,000 threshold.
Small business entities that want to elect into a general small business pool should consider doing so for the 2022–23 income year. This could allow them to bring the tax written down values of eligible depreciating assets into the pool in 2022–23 income year, with a full write-off of the balance being available.
For other taxpayers, no instant asset write-off applies from 1 July 2023, assets costing less than $1,000 can be allocated to a low value pool if the taxpayer elects to do so.
Tell us your plans by contacting our office, and we will guide you through the best course of action available for your business.