The small business instant asset write-off threshold has increased from $1,000 to $6,500 small businesses can claim an accelerated initial deduction for motor vehicles acquired in 2012-13 and subsequent years
The long life small business pool and the general small business pool have been consolidated into a single pool to be written off at one rate.
These amendments only apply to you if you are a small business that has an aggregated turnover of less than $2 million. Your aggregated turnover includes the annual turnover of your small business and the annual turnovers of any connected or affiliated businesses.
**These changes apply from 2012-13 onwards.**
Can you claim an instant asset write-off?
From the 2012-13 income year onwards, you can choose to use the capital allowance provisions in Subdivision 328-D to immediately write-off (that is, claim a deduction for) a depreciating asset that cost less than $6,500.
You can write the depreciating asset off at the end of the income year where you either:
* start to use it for a taxable purpose
* have it installed ready for use for a taxable purpose.
Example: Claiming a deduction for an asset under the instant asset write-off threshold
During the 2012-13 income year, Kylie’s Flowers buys a new refrigeration unit for $3,000. As the refrigeration unit is a depreciating asset and costs less than $6,500, the business can claim an immediate $3,000 deduction for the 2012-13 income year.
Can you claim an accelerated deduction for motor vehicles?
From the 2012-13 income year, you can choose to use the capital allowance provisions in Subdivision 328-D to calculate the deduction for a motor vehicle costing $6,500 or more that you start to use, or have installed ready for use, for a taxable purpose.
The cost of the motor vehicle is added to the general pool but unlike other assets, the deduction is $5,000 plus 15% of the remaining amount.
What are the simplified depreciation pooling arrangements?
From the 2012-13 income year, the long life small business pool and the general small business pool have been consolidated into a single pool to be written off at one rate.
You need to add together the closing balance of your long life pool and general small business pool for the 2011-12 income year to calculate the opening balance of your general small business pool for the 2012-13 income year.
Example: Consolidation of the depreciation pools for 2012-13 income year
Chantal’s Cafe is a small business entity. At the end of the 2011-12 income year, the closing balance of its long life pool was $8,000 and the closing balance of its general small business pool was $10,000.
For the 2012-13 income year, Chantal’s Cafe’s long life pool no longer exists, but its general small business pool opening balance is now $18,000 (that is, $8,000 + $10,000).
From the 2012-13 income year, the deduction for an asset acquired during an income year and allocated to the general small business pool is 15% of the taxable purpose proportion of its adjustable value. The general small business pool is written off at a rate of 30% per income year thereafter.
Example: Depreciation of assets acquired during the income year and allocated to the general small business pool
The opening balance of Chantal’s Cafe’s general small business pool for the 2012-13 income year is $18,000. During the year it purchased a new large oven for $7,500.
The business can deduct 15% of the cost of the oven ($1,125) in the 2012-13 income year.
To calculate the deduction for the general small business pool for the 2012-13 income year, Chantal uses a rate of 30% ($18,000 × 30% = $5,400). Chantal’s Cafe’s total deduction for the 2012-13 income year is $6,525 (that is, $1,125 + $5,400).
The change means that long-life pool assets purchased in the 2012-13 income year and later years will be added to their general small business pool and depreciated at 15% in the first year and 30% in subsequent years.
Assuming Chantal’s Cafe makes no other purchases, the closing balance of their pool for 2012-13 will be $18,975 (that is, the remaining $6,375 value of the oven, plus the remaining $12,600 in the pool).
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