Business taxation Large business SME & family business Deductions

Explained: Full Expensing of Depreciating Assets

Written by Robyn Jacobson, CTA, Senior Advocate

   

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Full expensing of depreciating assets (FEDA) is an important topic for tax professionals to understand. This measure, which was rolled out as part of the Federal Government’s economic response to COVID-19, allows eligible businesses to deduct the full cost of certain depreciating assets. It’s designed to encourage investment in certain capital assets, and therefore stimulate growth and protect jobs during the pandemic.

Originally, FEDA, also known as Temporary full expensing, applied to eligible assets first held from 7.30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2022. In the Federal Budget 2021-22, the Government announced it would extend the measure by 12 months until 30 June 2023.

In December 2020, a legislative amendment provided businesses with the ability to opt out of FEDA on an asset-by-asset basis.

As FEDA has evolved, it’s become increasingly important for businesses — and the tax practitioners who work with them — to fully understand the tax treatment of acquiring a depreciating asset before proceeding with the purchase. If FEDA does not apply to an asset (for example, it may have been first held before 7:30pm on 6 October 2020) or your client opts out of FEDA for a certain asset, they may still be eligible for other concessions in 2020–21, such as the Instant Asset Write Off, the Backing Business Investment accelerated depreciation measure or the Small business simplified depreciation rules.

The interaction of these different tax measures is complex and can make a big difference to your clients’ tax position. This detailed infographic explores the interaction of FEDA with the Instant Asset Write Off (IAWO), the Backing Business Investment measure and the simplified depreciation rules.

In one handy and comprehensive tool, we’ve combined insights on dates, thresholds, exclusions, treatment of disposal of assets, changes in the extent of taxable use and much more to help you assist your clients effectively.

Publish date: 23 June 2021

  • Business taxation
  • Large business
  • SME & family business
  • Deductions