• Simpler depreciation rules for business

    11 June 2013

    Media article 2013/06

    If you are a small business with turnover of less than $2 million the depreciation rules for business assets are now simpler. These changes apply from the 2012-13 income year onwards.

    The small business instant asset write-off threshold has increased from $1,000 to $6,500 allowing small businesses to immediately write-off most new depreciating assets costing less than $6,500.

    This means for example if you bought a $5,900 camera and a $4,500 high resolution printer that are used exclusively for your photography business, as each item cost less than $6,500, you can now immediately write off the cost of both the camera and the printer in the 2012–13 income year.

    Depreciating assets that cost $6,500 or more (regardless of their effective life) are now added to the general small business pool and deducted at a single rate of 30 per cent. Newly acquired assets are deducted at 15 per cent (half the pool rate) for the first income year.

    For the 2012-13 income year onwards, small businesses that purchase a vehicle can now also claim an additional deduction of up to $5000 in the income year it is purchased.

    This changes the way the depreciation deduction for a motor vehicle is calculated in its first year. The change effectively brings forward the depreciation deduction to earlier in the vehicle’s life.

    Where the vehicle is used exclusively for business and has not been written off immediately under the instant asset write off, the cost of the motor vehicle is added to the general small business pool and the deduction is made of up of $5000 plus 15 per cent of the vehicles remaining value.

    For example, if a motor vehicle costs $20,000 and is used exclusively in your business then under the new rules the deduction in the first income year will be $7,250. That is $5,000 plus 15 per cent of the $15,000 remaining value. Under the old rules the deduction would have been $3,000 in the first year.

    What is even better, is the long life pool no longer exists. This means that if you had a long-life pool, its closing balance is rolled over to form part of the opening balance of the general small business pool for the 2012–13 income year. The general small business pool is depreciated at a rate of 30 per cent. Newly acquired assets are deducted at 15 per cent (half the pool rate) for the first income year.

    For more information see Small business entity concessions - home.

    Last modified: 11 Jun 2013QC 35076