The Australian Tax Office’s (ATO) depreciation rules have a provision known as “Temporary Full Expensing”, applicable until 30 June 2023. This allows businesses to write off the total cost of eligible depreciable assets, such as machinery or equipment, when used or installed and ready for use. So, for example, if a business purchased an excavator for $100,000, they could write off the entire cost in the year of purchase.
Let’s look at an example with a $100,000 excavator purchased by a business. Here’s how the math works out:
| Account Name | Without Tax Write-off | With Tax Write-off |
|---|---|---|
| Income | $500,000 | $500,000 |
| Cost of Excavator | $0 | $100,000 |
| Taxable Income | $500,000 | $400,000 |
| Tax Owed (25%) | $125,000 | $100,000 |
In this case, the business would save $25,000 in taxes in the year of purchase due to the immediate full expensing of the excavator. The company would still be paying taxes, but because they’ve reduced their taxable income by the cost of the excavator, they owe less in taxes for that year.
This example assumes that the business qualifies for the Temporary Full Expensing provision and that the excavator is an eligible depreciable asset. Act now and fill in the form below and put ‘tax-write-off’ in the product name, and one of our sales reps will be in touch with you asap.
References:
- Australian Taxation Office. (2023). Guide to depreciating assets 2023.
https://www.ato.gov.au/forms/Guide-to-depreciating-assets-2023/?page=11 - Australian Taxation Office. (2023). Simplified depreciation rules. https://www.ato.gov.au
- Australian Taxation Office. (2023). Uniform capital allowance system: calculation of decline in value. https://www.ato.gov.au
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Note: We recommended consulting a tax professional or the ATO for accurate advice.