The Treasury Laws Amendment Bill 2020 amends income tax law to allow businesses to deduct the full cost of eligible depreciating assets.
This applies to assets first held and used or installed ready for use after 6 October 2020 (budget time 2020) and before 30 June 2022. Additionally, businesses are able to deduct the full cost of improvements to such eligible assets as well as any improvements to existing eligible assets during this period.
There are a series of conditions that must be met in order for a business to be eligible. There are also several exclusions that may make a business ineligible. The relevant conditions are depicted in Figure 1 and explained below.
Figure 1. Eligibility Flowchart
The term aggregated turnover will include group companies located within and outside of Australia. Your global consolidated annual report will be a good starting reference point.
A depreciating asset is an asset that is covered under Division 40 of the Income Tax Assessment Act 1997 e.g. Plant and equipment, office furniture, motor vehicles and certain intangible assets. The asset cannot be a capital works asset (e.g. buildings and structural improvements), certain primary production assets or asset that has been allocated to a low-value pool or software development pool.
Where an entity is not eligible for temporary full expensing of the acquisition costs of the asset due to having acquired the asset before 6 October 2020, it may still be eligible for temporary full expensing of the second element costs (e.g. costs to improve the asset or to relocate the asset) if those improvements occurred after 6 October 2020 and before 30 June 2022.
Having a rental property by itself may not qualify as a business.
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