Temporary full expensing scheme to end on June 30 2023 for Australian businesses

The temporary full expensing scheme is ending on June 30, 2023. But why does it matter to your business, or should you even avail it? The key benefit of the temporary full expensing (TFE) scheme is the absence of any ceiling on the depreciable asset value with a few asset category exceptions.

However, from July 1 2023 the ceiling on asset value for instant asset write off will be reduced to AUD 20,000 and will remain until June 30 2024.

From July 1 2023, a cap of AUD 20,000 per asset value will be applicable for instant asset write off for businesses with aggregated turnover of under AUD 10 million.

What assets are eligible for temporary full expensing scheme?

Depreciable assets meeting the following conditions are eligible for temporary full expensing:

• New depreciable assets (for all businesses with aggregated turnover under AUD 5 billion)
• Second-hand depreciable assets (limited to businesses with aggregated turnover below AUD 50 million)
• First held by a business at or after 7.30pm AEDT on 6 October 2020.
• First used or installed ready for use by a business for a taxable purpose (commercial use) between 7.30pm AEDT on 6 October 2020 and 30 June 2023.

Consider loss carry back

You might make a tax loss in an income year as a result of claiming an immediate deduction under temporary full expensing. If you are a corporate tax entity, instead of carrying the tax loss forward and using it to offset your future income, you can consider if you are eligible for a refundable tax offset under loss carry back.

The write up on loss carry back should have a different background to really stand out.

What tax incentive rules will apply after June 30 2023?

Instant asset write off for small businesses

From July 1 2023 till June 30 2024, Australian businesses will only be able to apply instant asset write off up to a value of AUD 20,000 per asset for multiple assets.

However, this instant asset write off incentive will only be available to small businesses with an aggregated turnover under AUD 10 million.

Example of a business availing temporary full expensing for a UTE

John is a licensed electrician in Sydney and  owns a 5 year old UTE and requires a range of tools and equipment to do his job. At the moment, John has an estimated profit of AUD 50,000 for FY 2023. It may be suitable for John to opt for the temporary full expensing scheme and upgrade his UTE to a Nissan Navara. This decision can help John reduce his tax liability to zero or a loss (which can be carried forward or backwards subject to conditions) and improve his cash flows that he can redirect to business improvement.

Well managed bookkeeping can help in timely preparation of tax documents to avail tax incentive schemes.

Should your business avail the temporary full expensing scheme before June 30, 2023?

The answer really depends on your business dynamics. Businesses assessing higher taxable income for FY 2023 may find it timely to opt for the temporary full expensing scheme now.

On the other hand, businesses looking to acquire multiple eligible assets under AUD 20,000 may opt to avail instant asset write off in FY 2023-24.

Whatever your financial scenario may be, Sproutstone Accounting can help you make the best decision for your business. Contact us today to setup an obligation free appointment with our experienced tax consultants (phone: (02) 7254 1094 Ext: 1, email: info@sproutstone.com).