The following changes to the Partnership tax return may affect you.
In this section:
- New labels on the 2021 Partnership tax return
- New measures – economic response to novel coronavirus (COVID-19)
- Temporary full expensing of depreciating assets
- Enhanced instant asset write-off
- Backing business investment (BBI)
- Small business entities using the simplified depreciation rules
New labels on the 2021 Partnership tax return
The following new labels deal with temporary full expensing, backing business investment and instant asset write-off:
New labels at new item 48 Aggregated turnover
- U – Select your aggregated turnover range
- V – Aggregated turnover
Item 49 Capital allowances new labels
- P – Are you making a choice to opt out of temporary full expensing for some or all of your eligible assets?
- Q – Number of assets you are opting out for
- R – Value of assets you are opting out for
- S – Temporary full expensing deductions
- T – Number of assets you are claiming for
- V – Are you making a choice to opt out of Backing business investment for some or all of your eligible assets?
- W – Number of assets you are opting out for
- X – Value of assets you are opting out for
- M – First year accelerated depreciation deductions for assets using Backing business investment
- O – Instant asset write-off deductions for non-small business entities
- N – Subsequent year accelerated depreciation deductions for assets using Backing business investment
New measures – economic response to novel coronavirus (COVID-19)
New rules follow the Government's economic response to novel coronavirus (COVID-19).
If you, as an employer, received a cash flow boost under the Boosting cash flow for employers measure, the amount is tax free (non-assessable non-exempt income) and you are entitled to a deduction for the pay as you go (PAYG) withholding paid. If the partnership was carrying on a business in 2020–21, different measures might apply to you. You may have an option to use the temporary full expensing, or the instant asset write off, or the backing business investment – accelerated depreciation, depending on:
- the aggregated turnover of your business
- whether you are applying the simplified depreciation rules
- when you acquired an asset and first use it for a taxable purpose.
Businesses may be eligible to receive the JobKeeper payment in respect of:
- eligible employees
- an individual who is an eligible business participant.
Any amount you received is assessable income of the business.
See also:
- COVID-19 – Information about ATO measures and tailored support
- COVID-19 – Frequently asked questions
- Support for business and employers
Temporary full expensing of depreciating assets
Businesses with an aggregated turnover of less than $5 billion can deduct in 2020–21 the business portion of the cost of eligible new depreciating assets.
To be eligible for temporary full expensing, a depreciating asset must:
- be first held, and first used or installed ready for use for a taxable purpose, from 7:30pm AEDT on 6 October 2020 to 30 June 2022
- be located in Australia and principally used in Australia for the principal purpose of carrying on a business
- have no balancing adjustment event happen to it in the same income year.
Additionally, the depreciating asset must:
- not be excluded from the uniform capital allowance rules in Division 40 of the ITAA 1997 (such as a building or other capital works)
- not be subject to the capital allowance rules of the ITAA 1997 in Subdivision
- 40-E (about low value and software development pools) or
- 40-F (about primary production depreciating assets).
The car limit applies to limit the temporary full expensing deduction where a car is designed to mainly carry passengers.
For businesses with an aggregated turnover of less than $50 million, temporary full expensing also applies to the business portion of eligible second-hand depreciating assets.
Businesses can also immediately deduct the business portion of the cost of improvements to eligible depreciating assets, and to assets acquired before 7.30pm AEDT on 6 October 2020 that would otherwise be eligible assets, if the improvement costs are incurred from 7.30pm AEDT on 6 October 2020 to 30 June 2022.
If your depreciating asset is not eligible for temporary full expensing, or you have chosen not to apply temporary full expensing, other depreciation provisions may apply, such as:
Businesses that do not apply the simplified depreciation rules can opt-out of temporary full expensing on an asset by asset basis. The choice is unchangeable and you must notify us by the day you lodge your income tax return for the income year to which the choice relates.
For further details on eligible assets and eligible businesses, see Temporary full expensing.
Enhanced instant asset write-off
If a depreciating asset is not eligible for temporary full expensing, or if you opt out of temporary full expensing, the enhanced instant asset write-off rules continue to apply to eligible businesses and eligible assets. The time by which the asset must be first used, or installed ready for use, to qualify for the enhanced instant asset write-off has been extended until 30 June 2021, provided the asset was purchased by 31 December 2020.
See also:
Backing business investment (BBI)
For 2019–20 and 2020–21 , eligible businesses can deduct the cost of eligible new depreciating assets at an accelerated rate using the Backing business investment – accelerated depreciation rules.
For each eligible new asset, the backing business investment – accelerated depreciation deduction applies in the income year the asset is first used or installed ready for use for a taxable purpose.
You claim the deduction when lodging your tax return for that income year. The usual depreciating asset arrangements apply in the subsequent income years the asset is held.
If you are eligible for backing business investment – accelerated depreciation, you can choose to not apply these rules on an asset-by-asset basis but your choice can't be changed once made. You make the choice in your tax return for the income year in which the choice relates, and you must notify us by the day you lodge your tax return.
If you are a small business that chooses to use the simplified depreciation rules you can't opt out of Backing business investment – accelerated depreciation.
See also:
Small business entities using the simplified depreciation rules
The instant asset write-off changes also apply to small businesses using simplified depreciation. In addition, a small business using simplified depreciation must deduct the balance of their general small business pool for an income year ending between 6 October 2020 and 30 June 2022.
Temporary full expensing applies to small businesses using simplified depreciation.
- If temporary full expensing applies to an asset of a small business using simplified depreciation the small business can't opt out of temporary full expensing for that asset.
- If temporary full expensing and instant asset write-off do not apply to an asset of a small business using simplified depreciation, the backing business investment rules may apply to the asset. If backing business investment rules do apply, it can't opt out of those rules.
The provisions that prevent small business entities from accessing the simplified depreciation regime for five years if they opt out of that regime continue to be suspended for income years that include 30 June 2021 and 30 June 2022.
A small number of assets are specifically excluded from the simplified depreciation rules. For these assets, you must use the general depreciation rules.
See also:
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