Temporary Full Expensing: Purchasing Plant & Equipment for your Business
If you’ve been looking to purchase plant or equipment for your business such as a new vehicle or machinery, there are some government tax
concessions that may be available to you. With the ATO announcing the end of the current “instant
scheme, there are still some temporary full expensing benefits you can access up to 30 June 2023.
If your business meets the eligibility criteria, you may be able to claim an immediate deduction for the full cost of eligible assets
purchased for your business, bringing forward a tax deduction from future years. This is a big consideration for any business owners that
are on the fence about upgrading their plant and equipment as it can result in income tax savings as well as a positive cashflow benefit.
Who is eligible?
Businesses with an aggregate turnover of less than $5 billion are eligible for temporary full expensing, however corporate tax entities with
a greater turnover may be eligible if they meet the alternative
What assets can I claim?
You can access the immediate deduction on any eligible asset, new or second-hand and while there is no general limit on the cost of the
assets you can claim, there are costs limits on specific assets such as a passenger vehicle which may apply. Further restrictions are also
in place for small businesses using the simplified
Deductions for the cost of improvements to your eligible existing assets can also be accessed, however this doesn’t include any fixtures or
How can I claim the temporary full expensing deduction?
You can claim the deductions in your tax return for the relevant income year, and unlike the “instant asset write off” method, temporary
full expensing offers far more flexibility with the option to opt in or out of the scheme on an asset-by-asset basis if not applying the simplified
What are some of the benefits and drawbacks or temporary full expensing?
You can generate some great income tax savings by claiming temporary full expensing deductions in addition with the GST refunds due on the
purchase of eligible assets.
There is also potential to reduce ongoing service and maintenance costs by trading or selling old machinery or vehicles and replacing it
with new Plant that is covered by warranties, as well as the possible cashflow benefit of converting the equity in the assets to cash.
The downside is that you will no longer be able claim any depreciation deductions for those assets in future periods and you may need to
enter into a new finance agreement to purchase new equipment.
Andy the Landscaper operates a successful landscaping business. His profit for the current financial year will be $200,000 (before
tax). Andy has an old bobcat that he’s looking to upgrade as it has been costing him more in maintenance and repairs. Andy also
needs a new work vehicle for himself and his foreman as both vehicles are out of warranty and are beginning to look a little old and tired
as well as requiring more regular and expensive maintenance and servicing. As Andy has had each item of Plant & Equipment for a
number of years and he has paid down his loans on each item, he has generated some equity in the assets. Andy is registered for GST so
he can claim a GST credit on the purchase of each new asset.
Andy's Landscaping Pty Ltd
Net Profit for 2023 Financial Year
Total Income Tax Payable at 25%
Value of Existing Equipment
Loan on Asset
GST on Sale
Cost of new equipment
New Vehicle for Andy
New Vehicle for Foreman
New Skid Steer Bobcat
Total Purchase Value
Net profit Analysis
Net Profit for 2023 Financial Year
ADD: Gain on sale
LESS: Tax Deduction on purchase
Net profit after purchase
Tax Payable at 25%
Income Tax Saving
* $50,000 less $27,272.73
* $15,909.09 less $6,818.18
Total Tax Benefits
As you can see from the above example, by realising the equity in the existing Plant & Equipment and purchasing three new assets, Andy
can generate a positive cashflow benefit for his business equal to $46,818.18.
The cashflow benefits are summarised below:
Equity Released from sale of assets
Add Total Tax Benefit
Total Cashflow Benefit
By utilising the ‘Temporary Full Expensing’ rules Andy has managed to improve his cash position in his business by $46,818.18.
To ensure a short term cashflow burden is not created, it’s imperative that the finance agreements that are undertaken to purchase the new
Equipment are on essentially the same terms as the incumbent loan agreements. If better terms, i.e. lower monthly repayment or
interest rate can be achieved, there is a smaller associated benefit to be derived.
Is the temporary full expensing method right for my business?
There are a number of ways to calculate asset depreciation and while temporary full expensing may generate some temporary cashflow for your
business, it may not be the right long-term method for your circumstances. It’s important to consult with your trusted adviser to ensure you
maximise your business cashflow with depreciation deductions.
With the rise of the Content Creator era, platforms such as TikTok, YouTube & OnlyFans have offered an opportunity for creators to profit from the audience they generate, but the tax office has put the booming industry on notice. Our latest article outlines the ATO's expectations on how the income should be treated.
If your business isn’t registered for Fringe Benefits Tax (FBT), it is important that you determine whether it needs to be. In this article
we discuss what the ATO deems a Fringe Benefit and what benefits are exempt.
Do you feel overwhelmed by your tax obligations? Are you unsure you’re getting the most out of the available tax concessions? If so, tax
planning could be the key to taking back control of your finances. In this article, we'll explore what tax planning is, who can benefit from it, and why it's a valuable financial management tool.