Let Us Help You Navigate Australia’s New Instant Asset Depreciation Rules

Case Study Example

Business has a net profit at 30 June 2021 of $4,000,000. They purchase a piece of equipment for $1,000,000 that is installed prior to 30th June 2021. The full cost of that asset can be written off in 2021 financial year. Business has a depreciation pool of $5,000,000 on equipment purchased in previous years. The net position is:

• Net Profit: $4,000,000
• Depreciation on new asset: $1,000,000
• Depreciation Pool at 30/06/2021: $5,000,000
• Net loss for 2021: $2,000,000

That $2,000,000 loss can be “carried back” and offset against profits in the previous year’s resulting in a tax refund to the business paid in 2021.

Program Details

• Applicable to businesses that turnover less than $5 Billion.
• Allows businesses to deduct the full cost of eligible capital assets in the financial year they are acquired. Assets must be acquired and installed by 30 June 2023.
• Business can write of the balance of the depreciation pool at end of the financial year.
• Eligible corporate entities with less than $5 billion turnover in a relevant loss year can carry back losses made in the 2019–20, 2020–21, 2021–22 and 2022-23 income years to a prior year's income tax liability in the 2018–19, 2019–20, 2020–21 and 2022-23 income years.