Instant asset write off:

What is it?

Eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used or installed ready for use

An example:

If John Smith from ABC Seed had some good years in 2018-2019 & 2019-2020 years and paid a bit of tax, then this year if he buys $1M of capital equipment he can write off the whole value of the asset in the 2020-2021 year and if he buys enough to make a good loss, then he can claim the loss carry back and get the tax he paid in the previous Financial years, he can get it paid back in cash. So not only does he save a heap of tax and cash being paid this year by being able to write off the whole value of the asset, he also physically gets cash injection from the govt.

Loss carry-back:

What is it?

Loss carry back provides a refundable tax offset that eligible corporate entities can claim

An example:

Bogong Builders Pty Ltd has aggregated annual turnover of $60 million for the 2021–22 income year. On 1 July 2021, Bogong Builders Pty Ltd purchases a truck-mounted concrete pump for $1 million, exclusive of GST. The company’s taxable income for 2021–22 was $600,000 before the purchase. Without temporary full expensing, Bogong Builders Pty Ltd would claim a tax deduction of around $300,000, resulting in a taxable profit of $300,000, and a tax bill of $90,000.

Under temporary full expensing, Bogong Builders Pty Ltd will instead deduct the full cost of the asset of $1 million, resulting in a tax loss of $400,000. Under temporary loss carry-back, Bogong Builders Pty Ltd offsets this tax loss against profits in 2018–19, resulting in a tax refund of $120,000. Without the refund, the company may have had to defer the investment until their cash flow position recovered, or may not have purchased the new pump at all.