Expanded accelerated depreciation for small business
This support note applies to:
AO Tax (AU)
AE Tax Series 6 & 8 (AU)
AE Tax (AU)
AE Assets (AU)
AE Assets Live (AU)
AO Assets Live (AU)
For COVID changes, see COVID-19 Support Package: Changes to depreciation.
The Government has now passed legislation to expand the accelerated depreciation by allowing small businesses with an aggregated annual turnover of less than $2 million to immediately deduct each asset that costs less than $20,000. This measure will apply to assets acquired from 12 May 2015 until 30 June 2018 (see note below).
MYOB has made the necessary changes to ensure that the legislative default occurs as of MYOB AE/AO version 5.4.11 and AE Assets version 2.4.3.
There are two main components to this legislation change for Small Business Entities (SBE):
The immediate write off amounts for assets purchased on or after 12th May 2015 is $20,000
The General Small business pool write off balance increase to $20,000
On May 9 2017, the Government announced an extension to the immediate deductibility threshold to apply until 30 June 2018. This means small business entities can immediately deduct the business portion of eligible assets where the cost is less than $20,000 and had been purchased between 12 May 2015 and 30 June 2018. This received Royal Assent on 22 June 2017. For further information, refer to the ATO website: Extending the immediate deductibility threshold for small businesses.
The immediate write off amount for assets purchased on or after 12th May 2015 is less than $20,000 Any assets purchased on or after 12th May 2015 with a value less than $20,000 will be eligible for immediate write-off. The increased threshold is proposed to apply until 30 June 2017. | The General Small business pool write off balance increase to less than $20,000. The General Small business value threshold will also increase to less than $20,000. This means that an immediate deduction is available if the pool balance is less than $20,000 at the end of an income year that ends on or after 12 May 2015 and on or before 30 June 2017. |
Asset is first used or held ready for use | 1/7/2012 to 31/12/2013 | 1/1/2014 to 11/05/2015 | 12/05/2015 to 30/06/2017 |
|---|---|---|---|
Asset cost qualifying for an immediate write-off | Asset Cost is $6500 or less. | Asset Cost is less than $1000. | Asset Cost is less than $20,000. |
Accelerated depreciation for Motor Vehicles costing more than $6,500 | $5,000 immediate write-off with the balance added to the pool and depreciated at the applicable pool rates (15% in the first year and 30% thereafter) | Not Applicable | Not Applicable |
General Small Business Pool new asset write-off | Asset Cost is $6500 or less. | Asset Cost is less than $1000. | Asset Cost is less than $20,000. |
General Small Business Pool balance write-off at the end of the tax year | *Pool Balance is less than $6,500 | *Pool Balance is less than $1,000 | *Pool Balance is less than $20,000 |
Legislation in relation to prior years applies where applicable.
Pool Balance
The ATO define "Pool Balance" as:
Opening Balance + Assets purchased or improved - Assets immediately written-off costing less than $20,000 = Pool Balance |
If this value, prior to calculating the decline in value, is below $20,000 then it is to be written off.
If this value, prior to calculating the decline in value, is $20,000 or more, then the decline in value (or depreciation) is to be calculated and claimed.
If the decline in value is calculated because the Pool Balance is $20,000 or more, and after this the closing written down value of the pool is below $20,000 this value does not qualify for the immediate write-off. This value will be carried forward to the following tax year and then reassessed in accordance with the ATO guidelines.
Key Points
The following points highlight some key areas that you may need to consider when completing 2015 Tax returns.
The “less than $20,000” threshold is available to all small businesses (including those who previously opted out of the simplified depreciation rules).
The increased threshold that applies between 12 May 2015 and 30 June 2017 applies to all small business entities, including those subject to the 5 year lock out rule in that period because the small business previously opted out of the small business entity capital allowance provisions.
For the purposes of applying the lock out rule to an income year after 30 June 2017, only the choice made in the in the last income year ending on or before 30 June 2017 is relevant.
There are accelerated depreciation measures with immediate write-off thresholds for Primary Producers who are also small businesses, and those taxpayers providing water facilities, assets that would normally be depreciated under SubSec 40-F and 40-G. For:
Fodder storage assets acquired on or after 12 May, 2015 may be written off in the year the expenditure was incurred (Immediate write-off)
Water facility assets and Fencing assets acquired on or after 12 May, 2015 – these may be written off over three years.