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Temporary Full Expensing

So what is temporary full expensing?

An incentive that allows eligible businesses to claim an immediate deduction for depreciating assets, in full, in the year of purchase and the asset being installed ready for use.

So that means the asset has to be on-site or installed so the business can use it to claim the deduction immediately.

So businesses with an aggregate turnover of five billion dollars or less can claim an immediate deduction for any new assets installed and ready for use.

And businesses with aggregate turnover of fifty million dollars or less can also claim an immediate deduction for secondhand assets that are installed and ready for use for the business.

What is classed as a depreciating asset?

It's an asset with a limited life expectancy or an effective life, and it can be reasonably expected to depreciate or decline in value over time.

So example, various pieces of equipment, computers, furniture, and lab equipment.

Now motor vehicles are subject to the depreciating cost limit.

And bear in mind that all assets are also subject to the business use percentage.

When does it end?

It's currently set to end on 30th June 2023.

So in three months' time, unless it is extended, but highly unlikely.

What happens after this date?

After 30th June 2023, the normal tax or depreciation rules will apply.

This means that the asset will need to be depreciated over its effective life.

So the tax benefits will be spread over multiple years rather than in one year as it currently is.

Can I still finance the purchase of the asset?

The answer is yes. So, as long as you get the right type of loan, usually, a channel mortgage or a hire purchase, and the goods are financed in the correct entity name, then you can take a loan to purchase the asset.

And bear in mind if you do have a loan, the interest is also deductible over the period.

If you have any questions, please feel free to reach out to me by booking a meeting with me online.

Tim Goode

Managing Director | Ignite Accountants



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