What are the IAWO and TFE Schemes?
The Instant Asset Write Off (IAWO) Scheme enables businesses to claim immediate deductions for certain costs relating to depreciating assets. In the 2020-21 Federal Budget, the government introduced the Temporary Full Expensing (TFE) Scheme that has built on the IAWO that was previously in place.
In the 2021-22 Federal Budget, the Government has announced that it is looking to extend the scheme by one more year, to 30 June 2023.
Now is an opportune time for businesses to look at updating their plant and equipment. Businesses are able to borrow funds to purchase the equipment and still claim the deductions for the cost of eligible depreciating assets.
How the scheme works
INVESTING IN NEW ASSETS
- Businesses with an aggregated turnover of less than $5 billion are eligible.*
- Corporate tax entities must meet the alternative income test. Click here to read more.
- The depreciating assets must be installed and ready for use between 01 July 2021 and 30 June 2022 to secure tax benefits for the FY 2021/22.
- There is no cap on the number of depreciating assets that can be purchased.
- There is no cap on the value of each asset.
INVESTING IN SECOND-HAND ASSETS
When investing in second-hand assets both of the following conditions apply:
- The assets must be installed and ready for use between 01 July 2021 and 30 June 2022 to secure tax benefits for the FY 2021/22.
- The eligible business’ aggregated turnover must not exceed $50 million.*
*Aggregated turnover – Your business’ annual turnover plus the annual turnover of any businesses or entities that are connected or affiliated with your business, whether they are based in Australia or overseas.
Other factors to be considered
- The deductions need to be claimed in the same financial year that the asset was installed and/or used.
- Providing invoices for the asset will not be sufficient to access the deductions under the TFE Scheme. The asset must be installed and ready for use by the above cut-offs.
- It is always recommended that you speak with your Accountant before acquiring assets under the Temporary Full Expensing Scheme.
- Assets excluded from the TFE if applying the alternative income test include – intangible assets, assets previously held by your associates, assets available for use at any time in the income year by your associates or entities that are foreign residents. Click here for a full list of excluded assets.
The above information is accurate as of November 2021. Please speak with your Pacific Finance Broker and your Accountant to find out if the conditions for this scheme have changed since. For more information, contact your Pacific Finance Broker on 08 9321 2120 or via info@pacificfinance.com.au