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Federal Budget 2021-22: Temporary Full Expensing and Loss Carry Back Measures extended

Federal Budget 2021-22: Temporary Full Expensing and Loss Carry Back Measures extended

One of the key pillars of the Government’s drive to increase business investment is the Temporary Full Expensing and Loss Carry Back measures.

These measures were first announced in the 2020-21 Budget and have been extended to 30 June 2022, providing significant planning opportunities for businesses considering asset acquisitions.

The Temporary Full Expensing measures allow upfront deductions for businesses acquiring depreciating assets (including second hand assets for businesses with a turnover of less than $50 million). Please refer to our communication summarising the Temporary Full Expensing measures from last year’s Budget here.

By itself, this upfront deduction provides significant tax savings for businesses. However, where the business’ upfront deduction exceeds its taxable income, this leads to a tax loss that can only be utilised in future income years.

Enter the Loss Carry Back rules, which interact with the upfront deduction to provide a cash refund for certain businesses. Where businesses incur tax losses in the 2019-20 to 2022-23 inclusive income years (including as a result of deductions claimed under the Temporary Full Expensing measures), and have franking credits from paying income tax in the 2018-19 onwards income years, they can claim a refundable tax offset against those franking credits – providing cash back to assist with ongoing operations.

Please refer to our case study here where we assisted our client to navigate the Temporary Full Expensing and Loss Carry Back rules to claim an upfront deduction for the acquisition of a business asset ultimately resulting in a cash refund from the ATO.

 

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.

Toni Eisenhut
Got questions? Speak to our team of experienced tax lawyers today.


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