On the 12 May 2015 at 7.30pm the Government announced that it was introducing new accelerated depreciation rules for small Business entities (SBE).
The rule originally allowed any asset purchased for less than $1,000 to be immediately written off. Under the new rules any asset purchased from 7.30pm on the 12 May 2015 through to 30 June 2017 that costs less than $20,000 can be written off.
1. This new limit applies to any asset costing less than $20,000.
Therefore, it is possible to purchase multiple items and as long as they are not part of a whole asset group (Like buying a computer and software) they can each be written off.
2. Investors and Employees are unable to access the concessions
3. The accelerated depreciation rules are available to any business that is considered a small business entity (SBE) and has elected to use the small business depreciation rules.
4. A business will be considered a small business entity if;
- Your annual turnover for the year will be less than $2,000,000
- You elect to use the small business depreciation rules
- The asset is acquired and installed before 30/6/2017
5. If you were previously in STS (Simplified Tax System) and opted out of it then you were generally excluded from entering back into the STS system for a 5–year period.
The government has announced that this rule will not apply for this period so tax payers can opt back in and avoid the 5 year lock out.
6. The asset purchase does not have to be a new asset, just new to the business.
Therefore, you could purchase a used item for less than $20,000 (Ex GST) and still be able to get an immediate deduction.
7. The $20,000 amount is the cost to the business.
If you are GST registered, then the GST excluded price (EG: $21,999 (total cost) – $1,999.91 (GST) = $19,999.09 (net)), but if you’re not registered for GST then the GST inclusive price ($19,999.99).
8. Immediate asset deductions may also be available to existing assets if you upgrade or improve an already existing asset and the asset had been written off in a previous year.
9. For instances a second hand vehicle was purchased 30/6/1012 and needed a new motor and gearbox worth $15,000.
Because the assets were allowed an immediate asset write in that year you could also apply the motor and gearbox to the current rules and claim the whole $15,000 as a deduction.
Finally, if the opening balance of all your existing assets in your financials is less than $20,000 in the year then you can apply an immediate deduction for this balance in the current year’s tax return.
Peter Carter – Certified Practicing Accountant
Peter is a Certified Practicing Accountant (CPA) and has completed an Advanced Diploma in Accounting and Bachelor of Commerce (Accounting and Finance Law).