Broadly, a new time-limited 15-month investment incentive (which will be available up until 30 June 2021) will also be introduced to accelerate certain depreciation deductions for businesses with an aggregated turnover below $500 million, in respect of eligible depreciating assets.

This incentive basically allows a deduction equal to 50% of the cost of an eligible asset, with existing depreciation rules applying to the balance of the asset's cost.

More specifically, the amount that an eligible entity (other than an SBE that is depreciating assets in its general small business pool) can deduct in the income year in which an eligible depreciating asset is first used or installed ready for use for a taxable purpose is:

Different rules will apply where an SBE is using the general small business pool (i.e., for assets that do not qualify for the instant asset write-off). In this case, the SBE may deduct an amount equal to 57.5% (rather than 15%) of the business-use portion of the cost of an eligible depreciating asset acquired by the entity in the year is it allocated to the pool.

Which depreciating assets are eligible assets?

An eligible asset is a new asset that can be depreciated under Division 40 of the ITAA 1997 (i.e., plant and equipment and specified intangible assets, such as patents), where the asset satisfies all of the following conditions:

Note that this measure will not apply to second-hand Division 40 assets, or buildings and other capital works that are depreciable under Division 43 of the ITAA 1997 (i.e., the building write-off).

This measure also does not apply to an asset if the asset's depreciation is worked out under a low-value or software development pool, or in relation to primary production depreciating assets such as water facilities, horticultural plants, fodder storage assets and fencing assets.

A depreciating asset is also not an eligible asset where a commitment to acquire or construct the asset was entered into before 12 March 2020 or where the asset would not be in Australia.