The temporary full expensing rules which have been in place since 6 October 2020, are coming to an end on 30 June 2023.

Businesses must take action to ensure they do not miss out on accelerated tax deductions for this financial year.

What is temporary full expensing?

Temporary full expensing (TFE) permits eligible businesses to claim an immediate deduction for the business portion of the cost of depreciating assets incurred between 6 October 2020 and 30 June 2023 when:

• eligible asset criteria is met. Eligible assets don’t include assets allocated to a low value pool, certain primary production assets, buildings and other capital works you can deduct amounts for under Division 43 or assets that will be never located in Australia or won’t be used principally in Australia for the principal purpose of carrying on a business
• new assets are first held, used or installed ready for use and aggregated turnover is less than $5 billion
• second-hand assets are first held, used or installed ready for use and aggregated turnover is less than $50 million
• improvements are made to existing assets (second element cost) that would be eligible assets except they were held before 6 October 2020.

Simply purchasing the asset is insufficient for claiming, it must be physically held, used or installed.

Is there a temporary full expensing limit?

There is generally no limit on the cost of assets to which you can apply temporary full expensing. However, limits may apply to certain assets, such as passenger vehicles that may be subject to a car depreciation limit.

Can I opt out of temporary full expensing?

You can choose 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 and claim a deduction using other depreciation rules. You must advise the ATO if you choose to opt out in your tax return. This choice is unchangeable.

If you’re interested in how the temporary full expensing rules can help your business, please contact our tax specialists in a timely manner to ensure the necessary conditions are met before June 30 2023. Call us on 03 5443 0344 or email afs@afsbendigo.com.au.