Interaction of tax depreciation incentives

In 2020, the government introduced measures to help businesses recover from the impacts of the coronavirus pandemic (COVID-19).

Only one incentive can apply for an asset. If more than one incentive could apply to an asset the order of application (subject to opt out choices) is:

Temporary full expensing
Instant asset write-off
Backing business investment
General depreciation rules.

This high-level snapshot explains the depreciation incentives that are available to eligible businesses entities and when they could consider using them. You can download a PDF version Interaction of tax depreciation incentives (PDF, 1.1MB)This link will download a file.

Depreciation incentives

Depreciation incentives include:

Temporary full expensing
Instant asset write-off
Backing business investment

Temporary full expensing

The Temporary full expensing measure allows full write-off for eligible assets first held at or after Budget Time 6 October 2020.

‘Temporary’ means it does not apply to assets first used or installed for taxable purposes after 30 June 2023.

For asset eligibility and exclusion rules, see temporary full expensing.

Instant asset write-off

For asset eligibility and exclusion rules, see instant asset write-off.

To 11 March 2020

Eligible assets costing less than $30,000 are eligible for full write-off if they were first acquired at or after Budget Time 2 April 2019.

Assets must have been first used or installed for a taxable purpose between 2 April 2019 and 11 March 2020.

From 12 March 2020

Eligible assets costing less than $150,000 are eligible for full write-off from 12 March 2020 if they were first acquired at or after Budget Time 2 April 2019 and on or before 31 December 2020.

Assets must have been first used or installed for a taxable purpose between 12 March 2020 and 30 June 2021.

Note: this is Budget Time 12 May 2015 for small business entities using simplified depreciation.

Backing business investment

The Backing business investment measure allows for an accelerated depreciation of eligible assets first held and first used or installed for a taxable purpose between 12 March 2020 and 30 June 2021.

For asset eligibility and exclusion rules, see backing business investment.

Applying depreciation incentives

The general steps to apply depreciation incentives are:

Identify if you are an eligible business by calculating your aggregated turnover.
Determine which incentive to apply. Only one incentive can apply for an asset. If more than one incentive could apply, the order of application is (subject to opt out choices)
Take note of whether you can choose to opt out of an incentive.
Determine when you first held and first used or installed each asset for a taxable purpose.
Consider if any exclusions or specific limits may apply (such as the car limit), even if the incentives are uncapped.

Full write-off

Full write-off means deducting the taxable use proportion of the cost of an asset.

It may also be available for improvement costs for eligible assets. Refer to our more detailed guidance on temporary full expensing for information on when these costs can be claimed.