Federal Budget 2021-22: Depreciation of intangible assets
Tax Law - 12 May 2021
The Government has announced changes to the calculation of the effective life of intangible depreciating assets, effective for assets acquired from 1 July 2023. The changes bring the calculation of depreciation of intangible assets into line with tangible assets, by allowing the acquirer to self-assess the effective life of the intangible asset.
For example, a business may successfully apply for a patent that it determines will become worthless in ten years. Under the current rules, the business is forced to depreciate the patent across 25 years. In comparison, under the Budget announcement where the business acquires the patent on or after 1 July 2023, it will be able to self-assess the effective life of the patent as ten years, allowing it to depreciate the patent across ten years rather than 25, providing a significant tax benefit.
At first glance the start date of 1 July 2023 is disappointing, however where the intangible asset is acquired prior to 1 July 2023 it should be eligible for an immediate deduction under the Temporary Full Expensing rules.
The information contained in this blog is general in nature and should not be considered to be legal, tax, accounting, consulting or any other professional advice. In all cases, you should consult with a professional advisor familiar with your factual situation for advice concerning specific matters before making any decisions. By reading this blog, you confirm your understanding of this disclaimer.
