The ATO has reminded small businesses with turnover of less than $2 million (i.e., small business entities or 'SBEs') that the depreciation rules for business assets are now simpler from the 2012/13 income year onwards.
Assets costing less than $6,500
The small business instant asset write-off threshold has increased from $1,000 to $6,500 allowing small businesses to immediately write-off most new depreciating assets costing less than $6,500.
Assets costing $6,500 or more
Depreciating assets that cost $6,500 or more (regardless of their effective life) are now added to the general small business pool and deducted at a single rate of 30%.
Newly acquired assets are deducted at 15% (half the pool rate) for the first income year.
Motor Vehicles
Small businesses that purchase a vehicle can now also claim an additional deduction of up to $5,000 in the income year it is purchased, effectively bringing forward the depreciation deduction to earlier in the vehicle's life.
Where the vehicle is used exclusively for business and has not been written off immediately under the instant asset write-off, the cost of the motor vehicle is added to the general small business pool and the deduction in the first year is made of up of $5,000 plus 15% of the vehicle's remaining value.
Example
An SBE purchased a motor vehicle on 29 June 2013 for $20,000 which is used exclusively in their business. Under the new rules, the deduction in the first income year will be $7,250, being $5,000 plus 15% of the $15,000 remaining value.
Under the old rules the deduction would have been $3,000 in the first year (i.e., 15% of $20,000).
This publication is issued by Moore Stephens Australia Pty Limited ACN 062 181 846 (Moore Stephens Australia) exclusively for the general information of clients and staff of Moore Stephens Australia and the clients and staff of all affiliated independent accounting firms (and their related service entities) licensed to operate under the name Moore Stephens within Australia (Australian Member). The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. Moore Stephens Australia, any Australian Member, any related entity of those persons, or any of their officers employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication. Copyright © 2011 Moore Stephens Australia Pty Limited. All rights reserved.
