Legislation to amend temporary full expensing and other budget measures introduced

December 3, 2020
A Bill including amendments to provide greater flexibility for accessing temporary full expensing of depreciating assets has been introduced into parliament.

Schedule 1 of the Treasury Laws Amendment (2020 Measures No 6) Bill 2020 amends the income tax law to provide an alternative test for determining eligibility for the temporary full expensing concession, potentially making more entities eligible for the measure. A corporate tax entity will satisfy the alternative test if the entity’s:

  • total ordinary and statutory income (other than non-assessable non-exempt income) is less than $5 billion for either the 2018–19 or the 2019–20 income year, and
  • total cost of Australian tangible depreciating assets first held and used, or first installed ready for use, for a taxable purpose in the 2016–17 to 2018–19 income years (combined) exceeds $100 million.
Where an entity’s substituted accounting period ends after 6 October 2020 (2020–21 Budget night), the alternative test will apply for the 2018–19 income year only. Entities qualifying under the alternative test will be subject to additional exclusions for assets eligible for full expensing.

The amendments will also allow entities to make an irrevocable choice to opt out of temporary full expensing and the backing business investment incentive on an asset-by-asset basis. If an entity makes a choice to opt out of temporary full expensing for an asset, it instead applies the standard capital allowance rules to determine decline in value or, if applicable, the backing business investment incentive. The operation of the temporary full expensing provisions in relation to balancing adjustments has also been clarified. A balancing adjustment event will occur where a fully expensed asset is not used for the principal purpose of carrying on business or is not located in Australia. The amendments will apply to balancing adjustment events that occurred before the commencement of the schedule.

Schedule 1 also clarifies that the choice under the temporary loss carry back measure must be to carry back a specified fixed dollar amount, not a percentage of a tax loss.

The Bill also makes minor and technical amendments to various tax and superannuation acts.