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Temporary full expensing rules are ending on 30 June 2023 – time for your horse business to get the whip out!

As the end of financial year approaches, the temporary full expensing rules will be coming to an end. What must horse businesses do to avoid missing out on accelerated tax deductions for this year?

The temporary full expensing (“TFE“) rules provide for a full deduction to businesses for the cost of eligible depreciating assets in the year they are first used, or installed ready for use, for a taxable purpose prior to 30 June 2023. Horse businesses should bear this strict timeline in mind to avoid missing out on accelerated tax deductions. Merely contracting for the purchase of an asset, or even becoming the owner of the asset by 30 June 2023 is not sufficient.

From 1 July 2023, the accelerated deductions will conclude, and depreciating assets will be required to be written-off for tax purposes over their effective lives.

First used or installed ready for use by 30 June 2023
Horse businesses should ensure that any capital investments are made with sufficient time to allow for delivery and use or installation of the relevant assets by 30 June 2023 to qualify for TFE. The 30 June 2023 date is a hard deadline regardless of whether the business entity has a 30 June year-end or a substituted accounting period. There is no discretion in the law to extend the date by which assets must meet this first taxable use requirement. As such, unexpected delays in the delivery, construction or installation of assets could result in horse businesses missing out.

Second element costs
“Second element costs” being those that contribute to bringing the asset to its present condition or location from time to time (e.g. improvement costs) may also qualify for TFE in the 2023 income year if they are paid or incurred prior to 30 June 2023. However, simply prepaying amounts or incurring amounts for improvements to existing assets that are to be made after 30 June 2023 are not likely to result in those costs qualifying for TFE. Horse businesses should also keep the 30 June 2023 deadline in mind if they are considering making improvements to or relocating existing depreciating assets to ensure that these things can be done in time.

Rules from 1 July 2023
From 1 July 2023, depreciating assets are required to be written-off for tax purposes over their effective lives.

There was some relief for small business as announced in the recent May Federal Budget.​​​​​​​

Small businesses, with aggregated turnover of less than $10 million, will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024.

Next steps

It is critical that if you wish to claim temporary full expensing for capital purchases for the 2022-23 income year that you ensure you meet the necessary conditions by 30 June 2023 and plan accordingly to ensure that the delivery and installation of assets can occur prior to the deadline. If you have any questions please reach out to your Stable Financial contact.