Australian Government: Backing Business Investment

A time limited 15 month investment incentive to support business investment and economic growth over the short term, by accelerating depreciation deductions.

This applies to eligible assets acquired from 12 March 2020 and first used or installed by 30 June 2021.

Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset cost.

Eligible businesses

• Businesses with aggregated turnover below $500 million

Eligible assets

• New assets that can be depreciated under Division 40 of the Income Tax Assessment Act 1997 (i.e. plant, equipment and specified intangible assets, such as patents) acquired after announcement and first used or installed by 30 June 2021.
• Does not apply to second‑hand Division 40 assets, or buildings and other capital works depreciable under Division 43 Timing
• Applies to eligible assets acquired from 12 March 2020 and first used or installed by 30 June 2021.

Examples of how this incentive can help your business
Joan and Bruce own a company, NC Transport Solutions Pty Ltd, through which they operate a haulage business on the North Coast of New South Wales. NC Transport Solutions Pty Ltd has an aggregated annual turnover of $8 million for the 2019‑20 income year.

On 1 May 2020, Joan and Bruce purchase a new truck for $260,000 exclusive of GST, for use in their business. Under existing tax arrangements, NC Transport Solutions Pty Ltd would depreciate the truck using their small business simplified depreciation pool.

Under the pooling rules, NC Transport Solutions Pty Ltd would deduct 15 per cent of the asset’s value upon entry to the pool, leading to a tax deduction of $39,000 for the 2019-20 income year. Under the new BBI, NC Transport Solutions Pty Ltd would instead claim an up-front deduction of 50 per cent of the truck’s value ($130,000) before placing the asset in their small business simplified depreciation pool.

Joan and Bruce would then claim a further 15 per cent deduction on the depreciated value of the truck ($19,500).

As a result of the two deductions, Joan and Bruce are able to claim a deduction totalling $149,500 in the 2019-20 income year, $110,500 more than under existing arrangements.

At the company tax rate of 27.5 per cent, Joan and Bruce will pay $30,387.50 less tax in the 2019-20 income year. This will improve NC Transport Solutions Pty Ltd’s cash flow and help Joan and Bruce’s business withstand and recover from the economic impact of the coronavirus.