Small business accelerate depreciation charges
The threshold below which small business can claim an immediate deduction for the cost of an asset they start to use or install ready for use will be temporarily increased from the current $1,000 to $20,000.
The $20,000 threshold will apply for assets acquired and installed ready for use between 7.30pm (AEST) 12 May 2015 and 30 June 2017. It is available for small business with an aggregate annual turnover of less then $2m.
Currently, under Subdiv 328-D of the Income Tax Assessment Act 1997, a small business can claim an immediate deduction for assets costing less than $1,000 to the extent the asset is used for tax deductible purposes.
With the increase of the threshold for the immediate deduction, assets valued at $20,000 or more that cannot be immediately deducted will be included in the entity’s small business pool and depreciated at 15% in the first income year and 30% each income year thereafter, in the same way the rules currently apply for assets costing $1,000 or more.
Similarly, over the period from 7.30pm (AEST) 12 May 2015 up to 30 June 2017, the balance in the small business pool can be immediately deducted if it is less than $20,000 (including an existing pool).
The current rules preventing a small business using the simplified depreciation regime for five years if it opts out of the regime will also be suspended until 30 June 2017.
From 1 July 2017, the $20,000 threshold for the immediate deduction of assets and the value of the pool will revert to $1,000.
While small businesses can access the simplified depreciation regime for a majority of capital assets, certain assets are not eligible (such as horticultural plants and in-house software) for which specific deprecation rules apply.