Being classified as a small business can provide certain accounting and tax concessions not available to other businesses. There are new changes from the ATO that apply from the 1st July 2012 (2013 Financial Year).
To be classified as a small business your business must have an aggregated turnover of less than $2 million.
Instant Asset write-off
A small business can immediately write-off a depreciating asset that costs less than $6,500. This means that any asset costing less than amount is expensed immediately rather than being depreciated over a number of years.
Accelerated Depreciation for motor vehicles
For a motor vehicle costing more than $6,500 an immediate deduction of $5,000 can be claimed in addition to the standard 15% deduction on the remaining balance.
Simplified Depreciation pooling arrangements
Previously small businesses have two ‘pools’ in which assets were placed to be depreciated. Now there is only one single pool. This gives simplicity and certainty that new assets are depreciated at 15% in the year that they are purchased and 30% in subsequent years.
Trading Stock Rules
If the value of your trading stock has not increased or decreased by more than $5,000 over the year you do not have the perform a stocktake and account for the changes at end of year.
Capital Gains Tax
To also apply for simpler CGT concessions the total net value of CGT assets must not exceed $6 million. There are four small business concessions:
- Small business 15-year exemption: If your business has owned an asset for 15 years and you are aged 55 years, you can disregard the capital gain
- Small business 50% active asset reduction: You can reduce the capital gain on an active asset by 50%
- Small Business rollover: Where there is a disposal of an active asset and the resulting capital gain is used to acquire a replacement asset the capital gain is deferred until sale of the replacement asset
- Small business retirement exemption: A capital gain from the sale of a business asset will be exempt up to a lifetime limit of $500,000. If you are under 55 years of age, the exempt amount must be paid into a complying superannuation fund or a retirement savings account to obtain the exemption.
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