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As part of the response to the widespread economic impact of COVID-19, the Federal Government announced in the 2020-21 Budget that it will allow a deduction for the full cost of certain depreciating assets acquired and used by eligible businesses - a measure known as ‘temporary full expensing’. In the 2021-22 Budget, the Government announced it would extend this for an additional year to 30 June 2023.

The temporary full expensing concession for capital investment is intended to stimulate investment in certain capital assets to maintain jobs and economic activity.

There are a number of issues that businesses should consider before claiming deductions under this measure and/or making significant investments. The ability to opt out of these measures, coupled with the interactions with the tax consolidation rules and the balancing adjustment for assets not used or located in Australia means that taxpayers need to not only consider their immediate plans for the use of the asset but also future plans for the asset when deciding whether to claim the upfront deduction.