The fascinating world of tax depreciation and the JobMaker Hiring Credit scheme

Roelof van der Merwe

Full expensing, prime cost or diminishing value tax depreciation

Businesses with a worldwide aggregated turnover of less than $5 billion can deduct the full cost of eligible depreciating assets that were first held and first used or installed ready for use in the business between 6 October 2020 and 30 June 2022. Businesses can also deduct the full cost of improvements made during this period irrespective of when the assets were originally acquired.

Under the law as it stands, a business that qualifies for this concession must claim the full deduction for the asset’s cost up-front and was not allowed to spread the capital allowance deduction over the asset’s life.

However, a new Bill provides businesses with an irrevocable choice to either apply the full expensing concession up-front or apply the general capital allowance rules to work out the decline in value for each eligible asset. For example, the prime cost method where a fixed amount can be claimed each year for the life of the asset or the diminishing value method where a diminishing amount is claimed each year for the life of the asset.

If this Bill becomes law, businesses will have more flexibility to manage their affairs and cash flow as they will be able to choose the most suitable capital allowance rules for each asset.

Registrations now open for the JobMaker Hiring Credit scheme

Pursuant to the new JobMaker Hiring Credit scheme, employers that employ people aged between 16 and 35 who were on JobSeeker, Youth Allowance or Parenting Payment recently, can receive a wage subsidy up to a maximum of $10,400 for each new position created provided the new hire works for at least 20 hours per week. The rate is:

  • $200 per week if the business hires a person aged 16-29.
  • $100 per week if the business hires a person aged 30-35 years.

The JobMaker Hiring Credit Scheme runs from 7 October 2020 to 6 October 2021 and is paid every three months in arrears to employers. Practically this means, provided employers have registered, the first JobMaker Hiring Credit can be claimed in early February 2021 for the JobMaker period of 7 October 2020 to 6 January 2021.

If you are an employer thinking of hiring new staff (especially over the Christmas break), please speak to your adviser or get in touch with the Tax Advisory team so we can register you for the JobMaker Hiring scheme and guide you through the process.