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Item 49 - Small business entity simplified depreciation

Small business entities – simplified depreciation

New laws have passed that allow small businesses to claim an immediate deduction for assets they first acquire and start to use, – or have installed ready for use, – provided each depreciable asset costs less than $20,000. This will temporarily replace the previous instant asset write-off threshold of $1,000.

This measure started at 7.30pm (AEST) 12 May 2015 and will end on 30 June 2018.

The balance of the general small business pool is also immediately deductible if the 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 2018 (including an existing general small business pool).

The current 'lock out' laws have also been suspended for the simplified depreciation rules (these prevent small businesses from re-entering the simplified depreciation regime for five years if they have opted out) until the end of 30 June 2018.

Immediate deductibility for start-up costs

Certain small business start-up expenses are now immediately deductible.

Section 40-880 of the Income Tax Assessment Act 1997 (ITAA 1997) allows for certain start-up expenses, including costs associated with raising capital, to be immediately deductible where they are incurred by a small business entity or an entity that is not in business. These provisions apply from the 2017-18 income year and onwards.

Only complete this item if the trust is a small business entity using the simplified depreciation rules.

Label A - Deduction for certain assets (costing less than $20,000)

Recent changes to the law mean that from 1 January 2014 the instant asset write-off threshold has reduced from $6,500 to $1,000 and the special depreciation rules for motor vehicles have been removed.

Show at label A the total amount claimed relating to low cost assets.

Label B - Deduction for general small business pool

Show at label B the total amount claimed relating to the General small business pool.

Refer to small business depreciating assets on the ATO website.

CCH References

7-050 Small business entities - aggregated turnover

7-250 Small business depreciation

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