Small business concessions | Simpler depreciation rules

23 July 2012

The 2012-13 financial year heralds a number of changes to the simplified depreciation rules for small businesses. The amendments apply to small businesses with an aggregated turnover of less than $2 million per annum. (Aggregated turnover includes the annual turnover of the small business and the annual turnovers of any connected or affiliated businesses). 

Increase to instant asset write-off 

The small business instant asset write-off has been increased from $1,000 to $6,500. I.e. A small business can claim an immediate tax deduction for depreciating assets that cost less than $6,500 (GST exclusive).

Consolidation of depreciation pools 

Depreciation pools allow for a simplified method of depreciating assets that cost more than $6,500. Instead of calculating depreciation separately for each asset over its effective life, all assets are allocated to a single pool and depreciated at a single rate. 
Prior to 2012-13 there were two pools: 

  • A long-life small business pool (containing assets that had an effective life of more than 25 years) written off at 2.5% in the year of acquisition and 5% per year thereafter; and 
  • The general small business pool (containing assets with an effective life of less than 25 years) written off at 15% in the year of acquisition and 30% per year thereafter.


From 2012-13, these pools have been consolidated into a single pool to be written off at the same rate as the general small business pool. 

The consolidated opening balance of the new pool will be written off at a rate of 30% if the opening balance is above $6,500. When the pool balance falls below $6,500 the total balance can be written off. 

All other rules of the existing pools remain in place. 
Accelerated motor vehicle depreciation 

Small businesses can claim an up-front tax deduction of $5,000 for motor vehicles acquired in 2012-2013 and subsequent years. 

The balance of the asset purchase cost will be allocated to the general small business pool and depreciated as per the process described above. 

The up-front tax deduction is not limited to new motor vehicles. 

A motor vehicle is a motor-powered road vehicle. The Australian Taxation Office (ATO) specifically excludes vehicles from this definition where the main function of the road vehicle is not related to public road use, or if the vehicle’s ability to travel on a public road is secondary to its main function. 

Motor vehicles, as defined by the ATO, include cars, trucks, vans, utilities, motorbikes and scooters but exclude road-rollers, graders, tractors, harvesters, earthmoving equipment or trailers.
For more information or to confirm if you are eligible for the small business depreciation concessions, please contact your local Boyce Accountant. 

Ben Calder - Boyce Tax Consulting Division

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