Expanded Accelerated Depreciation for Small Business

Expanded Accelerated Depreciation for Small Business

The Government has proposed to expand accelerated depreciation by allowing small businesses with an aggregated annual turnover of less than $2 million to immediately deduct each asset that cost less than $20,000.
This will replace the previous instant asset write-off threshold of $1,000.
The measure will apply to assets acquired from 12 May 2015 until 30 June 2017 and;
  • The deduction is claimed in the income year in which the asset is first used or installed ready for use.
  • The changes will apply on a per asset basis, so several assets each costing less than $20,000 would qualify
  • Includes new and second hand assets

The balance of a small business pool can also be immediately deducted 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 2017 (including existing pools).

The Government will also suspend the current 'lock out' laws 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 30 June 2017.

This proposed measure commences 7.30pm (AEST) 12 May 2015 and will cease on 30 June 2017.

Assets excluded from these depreciation rules include horticultural plants and in-house software allocated to a software development pool. In most cases specific depreciation rules apply to these excluded assets.

Assets that cost $20,000 or more (which can't be immediately deducted under other provisions) can be deducted over time using a small business pool. Under the pooling mechanism a deduction for 15 per cent of the cost is allowed in the first income year with a 30 per cent deduction allowed for each income year thereafter.

Legislation and Supporting Material

The Tax Laws Amendment (Small Business Measures No. 2) Bill 2015 passed both Houses of Parliament on 15 June 2015.

More information is available from the ATO at http://www.ato.gov.au