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Temporary Full Expensing Replaces the Instant Asset WriteOff

Temporary Full Expensing – Get in Before June 30!

Temporary full expensing is a scheme that allows you to buy business assets and pay less tax. It was introduced in October 2020 as an enhancement of the instant asset write-off scheme.

 

How does temporary full expensing work?

Temporary full expensing allows you to claim a tax deduction for business assets. Common examples are business vehicles, equipment, machinery and tools. The cost of these assets is immediately deducted from your income, so you pay less tax.

In a nutshell, temporary full expensing makes it cheaper for you to buy assets. The tax office is effectively subsidising your asset purchase cost by the amount you save in tax.

 

What are the eligibility requirements?

The eligibility requirements for temporary full expensing this financial year are:

1) your business must have an annual turnover of less than $5 billion.

2) you must have bought the asset after October 6, 2020.

3) you must have used or installed it prior to 30 June, 2021.

If you bought an asset between July 1 and October 5, 2020, you can write it off if you meet both of these requirements:

1) it cost less than $150,000.

2) your business has an annual turnover less than $500 million.

You should always discuss your eligibility with your Accountant to ensure you have a professional opinion based on your unique circumstances.

 

Temporary full expensing FAQs

Q: Can you buy a fleet of cars and write them off under temporary full expensing?

A: Yes.

Q: Can I take advantage of temporary full expensing if I’m a sole trader?

A: Yes.

Q: Is there a limit on how much you can claim for a vehicle?

A: Yes for passenger vehicles (the maximum is $59,136 of the car’s value, excluding GST). There is no limit on vehicles that can carry over 9 passengers or that weigh over a tonne.

Q: How long will the temporary full expensing scheme last?

A: The scheme was scheduled to stop at the end of the 2021/22 financial year. However, in the recent Federal Budget, it was extended by another 12 months. It is now scheduled to stop at the end of the 2022/23 financial year.

Q: Can you use temporary full expensing if you buy your car on finance?

A: Yes if you use a chattel mortgage.

Q: How much does temporary full expensing benefit my business?

A: This depends on the value of the asset you buy and the tax rate you pay. Here are some examples.

Example 1 – sole traders/partnerships

You’ll be paying tax on your business income at your marginal rate. Imagine that your income was going to be $80,000. Your tax bill would be $17,547.

But if you bought a business vehicle for $50,000 before June 30, your taxable income would drop to $30,000. Your tax bill would only be $2,242. That’s a tax saving of $15,305 that you can put towards the cost of your new vehicle.

It’s important to separate any private use of a business vehicle. You can only write-off the proportion of business use. For example, if the vehicle is only used 80% of the time for business purposes, you’ll only be able to write-off 80% of its cost.

Example 2 – companies

If your small business has a company structure, your tax rate is 26%. Imagine that your business income was going to be $120,000. Your tax bill would be $31,200.

But if you bought a new vehicle for $50,000 before June 30, your business income would drop to $70,000. Your tax bill would drop to $18,200. That’s a tax saving of $13,000 that you can put towards the cost of your new vehicle.

How we can help

If you’re looking to buy any car and you need finance, talk to us. We’re finance brokers. We can make sure you get a great deal.

Don’t use dealer-arranged finance or try to arrange it yourself. If you do, you’ll end up paying a lot more. We arrange car finance for a living. We work for our clients, not for lenders.

Call 1300 301 051 during business hours to speak with one of our experienced brokers.

 

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