Fixed Assets – 2021 Year End Tax Planning Series

As we move towards the end of the 2021 financial year, it is a good idea to start considering what tax planning strategies to put in place now to minimise your tax liability. In the fourth part of this eight-part series, we will outline a number of suggestions that may assist taxpayers to legitimately minimise or defer their taxation exposure in relation to fixed assets.

Please note these suggestions are of a general nature only and should not be relied upon without seeking specific personal advice. With 30 June fast approaching, you need to act quickly, and we encourage you to contact our office on 1300 620 345 to schedule a meeting as soon as possible to assess your options and discuss the steps you need to take.


Temporary Full Expensing of Assets

From 7.30 pm AEDT on 6 October 2020 until 30 June 2022 the temporary full expensing allows:

  • Eligible business entities with an aggregated turnover less than $5 billion or corporate tax entities that satisfy the alternative test, can immediately expense the cost of eligible new depreciating assets; or
  • Eligible businesses with an aggregated turnover under $50 million can immediately expense the business portion of the cost of eligible second-hand assets; or
  • Businesses with an aggregated turnover under $10 million can immediately expense the balance of a small business pool at the end of each income year in the period.

Accelerated Depreciation Turnover Less Than $500m

An immediate deduction is available for entities with an aggregated turnover of less than $500m for assets first used or installed ready for use between 12 March 2020 until 30 June 2021 and purchased by 31 December 2020, cost less than $150,000 up from $30,000.

Note that the general small business pool’s balance is also immediately deductible if the balance is less than $150,000 on 30 June.

Backing Business Investment – Accelerated Depreciation

From 12 March 2020 until 30 June 2021, the government has provided an investment incentive to support businesses with an aggregated turnover of less than $500 million by introducing accelerating depreciation deductions. The rules are outlined below (some exclusions apply):

  • Small business entities using the simplified depreciation rules can claim 57.5% of the cost of a new depreciating asset (for those assets which exceed the instant asset write-off amount) in the first year they add it to the SBE general pool. Existing rules apply for the balance of the asset.
  • For small business entities not using the simplified depreciation rules, they can claim a deduction of 50% of the cost of a new depreciating asset. Existing rules apply for the balance of the asset.

Depreciation Schedule

Review your depreciation schedule you have received in your 2020 financial statements or income tax return. Advise us of any assets that have been either disposed or destroyed in the 2021 financial year. These assets will be written off and any remaining balance will be deductible.

Obsolete fixed assets such as plant and equipment should be scrapped or decommissioned prior to 30 June to enable the book value to be claimed as a tax deduction.

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