Temporary Full Expensing - All You Need to Know
Are you wondering if the Temporary Full Expensing program could benefit your business? Maybe you're considering investing in some new commercial cooking equipment, and you want to know how the scheme can help you reduce your taxable income.
This guide will help you understand what an Temporary Full Expensing is, how it works, who's eligible and what you'll need to do to make the most of it.
What is Temporary Full Expensing?
Temporary Full Expensing is an initiative introduced by the Australian Government that enables eligible companies to claim immediate deductions when buying new equipment. Simply put, it is a tax break for small to medium-sized businesses, allowing them to acquire capital assets and get an immediate tax deduction.
Essentially, it is a way of simplifying and accelerating depreciation rules for newly purchased assets. If your assets qualify for an immediate write-off, it allows you to reduce your taxable income and will make your tax return less complicated to complete.
How Does Temporary Full Expensing Work?
Temporary Full Expensing allows businesses to deduct the value of an asset immediately within the first year of its purchase, rather than claiming those deductions over several years. It can be used for multiple assets, providing the cost of each item is within the threshold.
It's not a cash hand-out - it is a deduction to reduce taxable profit. It allows business owners to immediately write off the cost of each asset that costs less than the threshold and claim a tax deduction in the year it is first used or installed.
If that asset has been purchased for personal use as well as business use, it is the business portion of the cost that qualifies for an Instant Asset Write Off. The claim must be made in the year the asset is first used or installed ready for use. The deduction can then be claimed on your business's tax return for that income year.
Am I eligible?
Your business should be eligible for an Instant Asset Write Off 2020 claim if you meet the following criteria:
- Annual turnover of less than $5 billion
- Asset first used, or installed ready for use, between October 6 2020 and June 30 2023
- Full cost of each eligible asset is deductible
What type of purchases can I claim for?
Almost anything, as long as it's within the ATO Temporary Full Expensing threshold. This threshold applies to the total cost of the asset, not just the taxable part. Deductions can be claimed for multiple assets, providing each individual asset is within the cost threshold.
For the catering and hospitality industry, this scheme covers a huge choice of equipment including commercial kitchen appliances such as ovens, dishwashers, fridges and freezers. The categories below are just a few you may wish to consider using the initiative for.
- Commercial kitchen appliances
- Plant and machinery
- Cars and vans
- Fittings and fixtures
- Security systems
- Computers and laptops
The asset must be used solely for business purposes if you want to claim the full deduction. If you're planning some personal use of the asset too, you'll need to calculate a pro-rated deduction based on the percentage of business use.
BROWSE ALL KITCHEN APPLIANCES BROWSE ALL REFRIGERATION
TIP: Always consult with your accountant or a qualified professional for advice on purchases and making Temporary Full Expensing claims. It is important to have a full understanding of how any large purchase will affect cash flow and finances, as well as the impact on your business plan. This article does not constitute financial advice.
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