Updated 10 June 2021 (announced in the 2021/22 Federal Budget)
In the 2021/22 Federal Budget (on 11 May 2021), the Federal Government announced that they will extend the TFEDA until 30 June 2023. It was otherwise due to finish on 30 June 2022. Other than the extended date, all other elements of FEDA will remain unchanged. This will be law when the Bill receives Royal Assent.
In the 2020/21 Budget the Federal Government introduced the Temporary Full Expensing of Depreciable Assets (TFEDA) measures to support businesses and encourages investment.
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
To be eligible for temporary full expensing, the depreciating asset must be:
- new or second-hand (if it is a second-hand asset, your aggregated turnover must be 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 2022 (now extended to 30 June 2023).
- assets allocated to a low-value pool or a software development pool
- certain primary production assets (water facilities, fencing, horticultural plants or fodder storage assets) that are primary production depreciating assets, unless you’re a small business entity who chooses to use the simplified depreciation rules for these assets
- buildings and other capital works you can deduct amounts for under Division 43
- assets that either
- will never be located in Australia
- won’t be used principally in Australia for the principal purpose of carrying on a business.
You can also immediately deduct the business portion of the costs of improvements incurred between 7.30pm AEDT on 6 October 2020 and 30 June 2022 for:
- eligible assets
- existing assets–for improvement cost only (assets that would be eligible assets except that you held them before 7.30pm AEDT on 6 October 2020).
If your business has an aggregated turnover of $50 million or more, you can immediately deduct the business portion of the cost of improvements to an asset that would otherwise be excluded because it is either a second-hand asset or an asset you entered into a commitment to hold, construct or use before 7.30pm AEDT on 6 October 2020.
You can make a choice to opt out of temporary full expensing for an income year on an asset-by-asset basis. However, if you are an SBE using the simplified small business depreciation rules, you cannot opt out of the TFEDA rules.
For further details, please visit the ATO website.
Please note that this article is intended to be a general guide only, and should not be seen to constitute legal or tax advice. Where necessary, you should seek a second professional opinion for any legal or tax issues raised in your personal or business tax affairs.