Asset tax write off gets new life

By: Andrew Hobbs

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Businesses will be able to count the costs of buying and repairing depreciable assets as a tax expense up until June 30, 2022, under a new budget measure.

Asset tax write off gets new life
Businesses will be able to write off the cost of depreciable assets up until June 30, 2022. Image courtesy Alamy


Generous business tax concessions made in the Federal Government’s budget, released last night, have been welcomed by industry groups.

Among a series of announcements made last night was a policy treasurer Josh Frydenberg says will help "kick start activity in the private sector."

"Businesses with a turnover of up to $5 billion will be able to immediately deduct the full cost of eligible depreciable assets acquired from 7:30pm (AEDT) on 6 October 2020 and first used or installed by 30 June 2022," he says.

"Small businesses will buy, sell, deliver, install, and service these purchases... It will unlock investment, expand the productive capacity of the nation and create tens of thousands of jobs."

The policy, which does not cover mining businesses, has no limit on value of assets eligible for full expensing.

Budget documents say the cost of improvements to existing eligible depreciable assets made during this period can also be deducted in full.

"Full expensing reduces the after-tax cost of new investment and provides a cash-flow benefit for businesses that acquire eligible assets," the documents say.

"The time-limited nature of the measure will provide a strong incentive for businesses to bring forward investment projects before it expires."

The measure is estimated to apply to around $200 billion worth of investment and will cover around 3.5 million businesses, which the government says is over 99 per cent of the businesses currently operating in Australia.

This significantly builds upon the enhanced $150,000 instant asset write-off and the Backing Business Investment measures introduced on 12 March 2020 as part of the Government’s response to COVID-19.

Tractor and Machinery Association of Australia executive director Gary Northover says he is pleased to see a continuation of the instant asset write-off program, which he says has driven sales of agricultural equipment since it was announced earlier in the year.

"Obviously the weather has been a big driver of the uptick in our industry in recent months, but the instant asset write-off has also had a major impact," he says.

"It looks very much like it will be good news for our industry."

Northover also welcomed a government decision to temporarily allow companies with a turnover of up to $5 billion to offset tax losses against previous profits on which tax has been paid.

"Normally, businesses would have to return to profit before they can use their losses, however, these are not normal times," Treasurer Josh Frydenberg says.

"Losses incurred to June 2022 can be offset against prior profits made in or after the 2018-19 financial year."

Northover says the policy will create more flexibility in the system which he says will support the machine sales industry – particularly in areas where dealers had been forced to carry writedowns owing to the drought and other conditions.


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