THE 2020-21 FEDERAL BUDGET introduced a number of new, temporary measures. The focus is to help boost the Australian economy out of this pandemic-induced recession, drive investment and to create more jobs.
This budget announced record-breaking incentives that are now available for businesses located Australia wide.
Introducing the Full Expensing policy
As one of the most arguably lucrative incentives available, the full expensing policy is available to 99% of Australian businesses.
Under the policy, any business with an aggregated turnover of up to $5 billion can instantly deduct any new plant and equipment asset purchased between 7:30 pm on 6 October 2020 and 1 July 2022.
So how does this actually work?
It essentially means if an eligible business buys a new plant and equipment asset (at any cost or value) they can claim it as a full expense in the year of purchase.
For example: If a business purchased $200,000 worth of new air conditioning systems, $100,000 worth of flooring and $50,000 in light fittings and shades for their office, they could claim this as an instant deduction under the full expensing policy.
This would result in a huge deduction of $350,000 from their taxable income.
How is this different from the previous Instant Asset Write-off?
We are all well aware of the previous instant asset write-off, so how is this different?
The short answer is that the full expensing policy effectively supercharges the previous arrangement.
The previous asset threshold was $150,000 and it’s now unlimited, while the business aggregated turnover requirement has increased from $500 million to $5 billion.
Business Owners can increase cash with tax claim-back
Full expensing wasn’t the only business incentive introduced in this budget. Another element of the multi-billion-dollar JobMaker Plan is the ability for businesses to apply tax losses against tax profits from a previous financial year.
Under this arrangement, if a business makes a loss in this, or in the next two financial years, they could claim a refund from as far back as FY 2018-19. The claim-back measure is in place to help businesses that are taking a hit from the pandemic and use their losses earlier to receive a bigger tax return.
Property depreciation is the key to making the most out of the business claim back.
This is because depreciation is a non-cash deduction. This means businesses can get more from the claim back without spending any money or making a fiscal loss.
Smart business owners that successfully use the full expensing and claim-back measures will be able to boost their cash flow by potentially thousands this year, and in years to come.
Claim more with the commercial Depreciation specialist
BMT Tax Depreciation’s comprehensive commercial schedules include every depreciation incentive on offer to Australian businesses. BMT understand how important it is to maximise business’s claims compliantly, and back every BMT schedule in the event of an audit.
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