BACKING BUSINESS INVESTMENT: WHAT YOU NEED TO KNOW ABOUT ACCELERATED DEPRECIATION
The COVID-19 situation is still ongoing, and many of us have been impacted in one way or another. But help has been announced by the federal, state and territory governments in the form of economic stimulus packages.
The different packages include a variety of measures to tide both businesses and individuals over through this period, and to assist in the eventual economic recovery.
There are several measures aimed specifically at supporting businesses, including initiatives for boosting cash flow, supporting workers, increasing instant asset write-off threshold, and accelerated depreciation deductions.
The accelerated depreciation deduction initiative is housed under the Backing Business Investment (BBI) measure, which helps businesses acquire needed equipment such as trucks, but allowing for greater tax deductions and thus improving cash flow.
Let’s take a closer look at BBI and see what it might mean for your business in the current economic climate.
Backing Business Investment eligibility
The first question on most minds would be this: who can access this?
According to the government, Australian businesses with a turnover of less than $500 million will be eligible.
However, different criteria seem to apply to small businesses. For more information on eligibility for BBI, see here.
Do note that, according to business.gov.au, there’s no need for businesses to directly apply for the BBI.
When does the BBI come into effect?
The BBI is a time-limited 15-month investment incentive by the federal government, and is applicable to eligible assets used or installed between 12 March 2020 and 30 June 2021 (inclusive).
BBI: the nuts and bolts
Getting down to brass tacks… what exactly does the BBI do?
The BBI is an investment incentive to support business investment and economic growth over the short term, by accelerating depreciation deductions.
This means that, with the BBI, your business’s depreciating assets—such as a truck—undergo an accelerated rate of depreciation, resulting in greater tax deductions.
Depreciating assets refer to assets that can reasonably be expected to decline in value over the time they’re used. This includes items such as trucks and cars; for further information on eligible assets, see the ATO website.
How BBI works
It’s important to note that for the BBI to be applied to the depreciating asset, the following apply:
- The asset must be new and has never been previously held by another business entity (other than as a trading stock);
- The asset must not already have other depreciation deductions applied, including the Instant Asset Write-Off rules;
- The asset must be first held and first used (or installed and ready for use for a taxable purpose) between 12 March 2020 and 30 June 2021 (inclusive).
- New South Wales
- Victoria
- Queensland
- South Australia
- Western Australia
- Northern Territory
- Australian Capital Territory
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