The following changes to the Trust tax return may affect you.
In this section:
- 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 Trust tax return
If you carried 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.
Temporary full expensing of depreciating assets
Businesses with an aggregated turnover of less than $5 billion can deduct the business portion of the cost of eligible new depreciating assets in 2020–21.
To be eligible for the 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
- not have had a balancing adjustment event happen to it in 2020–21.
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)
- 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.
If your aggregated turnover is less than $50 million, temporary full expensing also applies to the business portion of your eligible second-hand depreciating assets.
You 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 those 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:
If you do not apply the simplified depreciation rules, you can op-out of temporary full expensing on an asset by asset basis. This choice is cannot be changed and you must notify us by the day you lodge your 2020–21 tax return.
For more details on eligible assets and eligible businesses, see Temporary full expensing.
Enhanced instant asset write-off
If a depreciating asset was not eligible for temporary full expensing, or you opted out of temporary full expensing, the enhanced instant asset write-off continued to apply if your aggregated turnover was less than $500 million. You must first have used the asset, or installed it ready for use, by 30 June 2021, provided you purchased the asset by 31 December 2020.
See also:
Backing business investment (BBI)
For 2019–20 and 2020–21, you may be able to deduct the cost of new depreciating assets at an accelerated rate using the backing business investment – accelerated depreciation rules.
For each 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.
If you are eligible for backing business investment – accelerated depreciation, you can choose to not apply these rules on an asset-by-asset basis. Your choice cannot be changed once made. You make the choice in your tax return, and you must notify us by the day you lodge your tax return for the income year in which the choice relates.
If you are a small business that chooses to use the simplified depreciation rules you cannot 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 business entities using the simplified depreciation rules. In addition, a small business using simplified depreciation must deduct the balance of their general small business pool for income years ending between 6 October 2020 and 30 June 2022.
Temporary full expensing applies to small businesses using simplified depreciation rules. When temporary full expensing applies to an asset of a small business, it cannot 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 rules, the backing business investment rules may apply. If so, the business cannot opt out of the backing business investment rules.
The provisions that prevent small business entities from accessing the simplified depreciation regime for five years if they opt out of that regime are suspended for income years that include:
- 30 June 2021
- 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:
New labels on the 2021 Trust tax return
These new labels deal with:
- temporary full expensing
- backing business investment
- instant asset write-off.
The new labels at new item 49 Aggregated turnover are:
- P – Select your aggregated turnover range
- Q – Aggregated turnover
The new labels at item 50 Capital allowances are:
- 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
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