Treasury unveils draft legislation for depreciation of intangible assets

Treasury budget intangible assets

Department of Treasury in Canberra. Source: AAP/Lukas Coch.

Treasury has released a draft bill and opened consultation for new rules allowing for depreciation in taxing intangible assets — a change that has been hailed as a win for startups and small businesses.

The changes will allow taxpayers to self-assess the effective life of eligible intangible assets such as patents, copyrights and software licences.

Businesses will be able to choose whether to use the new self-assessment method, or whether to continue using the tax-effective life set by the statute.

If the value of the intangible asset increases by 10% or more, however, the new legislation means the effective life of that asset must be recalculated.

The change to this legislation was first announced in the 2021 federal budget, as part of the $1.2 billion expansion to the government’s digital strategy.

Reported to come at a cost of $170 million, it was lauded as an acknowledgement of the importance and value of tech resources.

According to Treasury, the change is intended to encourage further investment into tech assets and into research and development.

This was something the tech sector has been calling for since the government introduced the $20,000 instant-asset write-off scheme in 2015.

While this allows for depreciation of assets used for income generation — think work vans and cafe kitchens — it excluded intangible assets such as software licences.

These are assets that are becoming increasingly crucial to all businesses, not only tech companies.

That said, the move was particularly welcomed by startups, many of which have few tangible assets to their name.

At the time, FinTech Australia chief Rebecca Schot-Guppy said the change signifies “a shift in thinking in how technology buoys our economy”.

If passed, the new legislation is expected to apply to assets acquired from July 1, 2023.

The consultation is open now, with submissions accepted until December 23. You can read the draft bill and find more information on how to lodge a submission here.

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