Introduced as part of the JobMaker plan, and extended in the 2021-22 Federal Budget, temporary full expensing allows businesses to instantly write-off the full cost of depreciable assets.
- From 6th October 2020 until 30th June 2023, businesses with a turnover of up to $5 billion are able to deduct the full cost of eligible depreciable assets in the year they are first used and installed.
- Businesses with a turnover of less than $50 million can also apply temporary full expensing to eligible second-hand assets.
- Assets are to be written off in the year that they are first used and installed. The assets must be installed and ready to use by 30th June 2023.
- Assets can be of any value.
- There are no limits to the amount of assets that can be written off
- The cost of improvements to existing eligible assets can also be written-off from 6th October 2020 to 30th June 2023.
- Examples of eligible assets include machinery sheds, workshops, sheep yard covers, cattle yard covers and shearing sheds.
- Examples of improvements to existing assets include extending your Action machinery shed or cladding a roof-only Action shed.
If your shed is not eligible for temporary full expensing, it may be eligible for the 100% write-off of fodder storage assets.
Temporary full expensing can help reduce your tax payable by first reducing your taxable income. Here is a generic example of how to apply temporary full expensing to a shed project, based off examples in the Budget Fact Sheet:
Kevin’s company, Kevin’s Farms Pty Ltd has an aggregated annual turnover of $20 million for the 2020-21 income year. On 30th January 2020 Kevin’s Farms Pty Ltd purchases five new Action Steel machinery sheds for $120,000 excluding GST each.
- Without temporary full expensing, Kevin’s Farms Pty Ltd would be able to claim a total tax deduction of around $180,000 for 2020-21. The remainder of the cost would be depreciated over future years.
- With temporary full expensing, Kevin’s Farms Pty Ltd can claim a deduction of $600,000, the full cost of the five Action machinery sheds.
At the 2020-21 tax rate of 26% for small and medium companies, Kevin’s Farms Pty Ltd will pay around $109,000 less in tax in 2021-22.
* Please note that our advice is general only. Speak to a qualified accountant to find out how this would apply to your business.