New asset write-off and loss carry-back measures announced

Asset write-off

First announced in the 2020 federal budget, the temporary full-expensing measure allows businesses with up to $5 billion in aggregated annual turnover or total income to immediately deduct the full cost of eligible depreciable assets of any value.

The measure, which was due to expire on June 30, 2022, will now continue for another 12 months, giving Australian businesses the ability to use it for all eligible assets acquired from 7.30pm on October 6, 2020, and first used or installed by June 30, 2023.

From July 1, 2023, normal depreciation arrangements will apply. However, businesses will be able to take advantage of a separate policy, included in the government’s digital economy strategy, which will allow them to self-assess intangible depreciating assets, such as patents, registered designs, copyrights and in-house software.

This change in how intangible assets are treated will apply to assets acquired from July 1, 2023.

In his budget speech, Treasurer Josh Frydenberg said the extension means “a tradie can buy a new ute, a farmer a new harvester and a manufacturer expand their production line”.

Loss carry-back

In a move likely to be welcomed by many small businesses in recovery from the pandemic, the temporary loss-carry back scheme has similarly been extended for another 12 months.

This policy, which was announced in last year’s federal budget, allows incorporated businesses to utilise tax losses to offset previously taxed profits.

It means when eligible companies lodge their 2022-23 tax return, they will be able to offset previously taxed profits from as far back as the 2018-19 income year to receive a tax rebate.

The value of the rebate is limited, as the amount carried back cannot be more than the earlier taxed profits.

Companies that opt not to use this measure can still continue to carry losses forward.

As with the asset write-off, this scheme is also available to businesses with aggregated turnover of up to $5 billion and will now expire in June 2023.

Contact your local TaxAssist Accountant if you have any questions about the content above.

Date published 12 May 2021