Instant asset write-off and simplified depreciation and SMSF – Be Prepared For New Penalty Powers

The government announced changes to the instant asset write-off previsions for small business. The changes are expected to come into effect from 1 January 2014.

From the 2012-13 income year small businesses have been able to write-off depreciating assets costing less than $6,500 in the income year in which they start to use the asset, or have it installed ready for use. The can also depreciate most other assets in the general small business pool at a rate of 15% in the first year and 30% thereafter.

If the proposed changes are enacted, the threshold will change and only assets costing less than $1,000 (acquired and installed ready for use after 31 December 2013) will be eligible for immediate write-off. Assets costing $1,000 or more will need to be depreciated in the general small business pool.

Assets costing less than $6,000, acquired and installed ready for use by the small business between 1 July 2013 and 31 December 2013, will still be eligible to be immediately written-off.

SMSF – Be Prepared For New Penalty Powers
The government announced that it will proceed with law changes that give the ATO greater powers in dealing with SMSF trustees who breach super law.

It is proposed that these new powers will apply to contraventions occurring from 1 July 2014 and cover:
• administrative penalties
• education directions
• rectification directions

They will also apply to contraventions that were made prior to 1 July 2014 and continue after that date.

For example, if SMSF has let money to a member or relative and the loan still exists on or after 1 July 2014 you will be liable for a penalty. The loan should immediately be repaid to the fund with appropriate commercial interest.

Under the proposed measures, penalties will vary according to the type of breach. In the example above, each individual trustee will be personally liable for a penalty of $10,200.

For an SMSF with a corporate trustee each director will be jointly and severally liable for a penalty of $10,200.

The penalty can not be paid using the resources of the SMSF and doing so would be considered a serious breach likely subject more significant penalties from the ATO.

Under the proposed administrative penalties the ATO must impose the penalty when we become aware of a relevant breach from 1 July 2014. To avoid these penalties make sure your SMSF is fully compliant with the super laws so that you don’t become liable for a penalty.


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