Various measures have been introduced by the Australian Federal Government to encourage a stronger economic recovery from the COVID-19 pandemic. The Backing Business Investment (BBI) Scheme is a time limited, 15 month incentive to support business investment and economic growth over the short term, by accelerating depreciation deductions.
Backing Business Investment Scheme
Businesses generally can’t deduct spending on capital assets immediately. Instead, you
claim the cost over time, reflecting the asset’s depreciation (or decline in value). This incentive allows eligible businesses with an aggregated turnover of less than $500 million to claim an accelerated depreciation deduction for certain new assets. To be eligible to claim the deduction in your next tax return – the depreciating assets must meet the following criteria:
- be new and not previously held by another entity (other than as trading stock)
- be first held on or after 12 March 2020 and be first used or first installed ready for use for a taxable purpose on or before 30 June 2021
- not be an asset to which an entity has applied depreciation deductions or the instant asset write-off rules
For eligible businesses, under the measures, different rules apply depending on whether an entity is using the simplified rules for capital allowances for small businesses. There is no limit to the cost of each eligible asset, except for cars, and no limit to the number of assets the Backing Business Investment Scheme can apply to.
Backing Business Investment Eligibility
Eligibility requirements for the BBI incentive depends on the type of business that is claiming.
Small Business Entities
Under the incentive; small businesses with an aggregated turnover up to $10 million and who use the simplified depreciation rules can place eligible assets to the general small business pool.
Small businesses can deduct an amount equal to 57.5% of the business portion of a new depreciation asset in the same financial year (instead of 15%). In following years, the asset will continue to be depreciated under the general business pool rules.
Other Business Entities
Businesses that have an aggregated turnover up to $500 million who don’t use the simplified depreciation rules may be eligible to deduct a specified amount of the qualifying asset under the BBI scheme.
The business can deduct 50% of the depreciating asset’s cost in the financial year, in conjunction with the standard rate of depreciation calculated on the remaining value after the 50 percent is deducted.
At AssetAccountant™ our goal is to take the complexity out of fixed assets.
If you’re reading this article, you’re feeling the pain of accountants and businesses across Australia who have to scour the ATO website regularly to make sure they’re always compliant.
Happily, AssetAccountant completely automates these calculations. We constantly update our depreciation software so you don’t have to get bogged down in the details. If you would like to speak to us to understand how the BBI scheme impacts on your business’ fixed asset depreciation please contact us to find out more.