The ATO has reminded small businesses with turnover of less than $2 million (ie small business entities or ‘SBE’ 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.
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.
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 (ie 15% of $20,000).