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The Treasurer’s move towards allowing businesses to opt out of fully expensing certain assets will provide flexibility to businesses and prevent depreciation benefits from being wasted.
Full expensing opt-out given tick of approval
26 November 2020
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7 minute read
Earlier this week, Treasurer Josh Frydenberg announced that the eligibility of the full expensing measure would be tweaked to allow larger Australian-based businesses to access the measure.
The measure currently allows businesses with aggregated turnover of less than $5 billion to deduct the full cost of eligible depreciable assets of any value in the year they are first used or installed.
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Mr Frydenberg also revealed that new legislation would be introduced to allow businesses to opt out of temporary full expensing and the backing business investment incentive on an asset‑by‑asset basis.
“This change will provide businesses with more flexibility in respect of these measures, removing a potential disincentive for them to take advantage of these incentives,” said Mr Frydenberg.
Tax and Super Australia tax counsel John Jeffreys said the announcement would be welcomed by a number of businesses, including those who operate through a trust.
“For some trusts, having to fully expense an asset could push the trust into losses and therefore leave them with no income to distribute,” said Mr Jeffreys.
“And that could mean that individuals who receive and rely on distributions through the trust as income could miss out on income and accessing the tax-free threshold.
“Issues also arise when arms-length trust owners want to distribute income out but have fully expensed an asset and so there is no income to distribute.”
Detailed legislation has yet to be released, with Parliament sitting next week.
The current full expensing measure is now law, having passed in mid-October.
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