Simpler depreciation rules for small business

Small businesses with turnover of less than $2 million 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 asst write-off threshold has increased from $1,000 to $6,500 allowing small business to immediately write-off most new depreciating assets costing less than $6,500.

An small business bought a $5,900 camera and a $4,500 high resolution printer on 20 June 2013 that are used exclusively for their photography business.

As each item cost less than $6,500, they can immediately write-off the cost of both the camera and the printer in the 2012/13 income year.

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.

The long life pool no longer exists, so small business taxpayers that had a long-life pool need to rollover the costing balance of that pool to form part of the opening balance of the general small business pool for the 2012/13 income year.

Motor Vehicles
Small business 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 general small business pool and the deduction is made of up of $5,000 plus 15% of the vehicles remaining value.

A small business 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 values.

Under the old rules the deduction would have been $3,000 in the first year.


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