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  • Simplified depreciation – rules and calculations

    This information is for bookkeepers, tax practitioners and others who are applying or advising on the simplified depreciation rules for small businesses.

    It sets out the detailed rules and how to calculate depreciation for eligible small businesses that have chosen to apply simplified depreciation.

    You can choose to use the simplified depreciation rules, including instant asset write-off, if you have a small business with an aggregated turnover of less than:

    • $10 million from 1 July 2016 onwards
    • $2 million for previous income years.

    Under these rules, you can:

    • use instant asset write-off for each new or second-hand asset you purchase that costs less than the relevant threshold at the time it was first used or installed ready for use
    • put assets that cost more than the relevant instant asset write-off threshold into a small business depreciation pool.

    You may also be eligible to use the new time-limited business investment incentive that enables eligible businesses to accelerate their depreciation deductions on the purchase of certain new depreciable assets.

    Find out about:

    Small business pools

    Small businesses can:

    • pool the business portion of most higher cost assets (those with a cost equal to or more than the relevant instant asset write-off threshold) and claim          
      • a 15% deduction in the year you start to use them or have them installed ready for use
      • a 30% deduction each year after the first year
    • deduct the balance of the small business pool at the end of the income year if the balance at that time (before applying the depreciation deductions) is less than the instant asset write-off threshold.

    For a worked example, see Simple depreciation for small business – Examples.

    You apply different rules where an asset is eligible for accelerated depreciation and costs equal to or more than $150,000.

    You then claim:

    • a 57.5% deduction in the year you start to use them or have the asset installed ready for use
    • a 30% deduction each year after the first year.

    If you choose to use the simplified depreciation rules, you must:

    • use them to work out deductions for all your depreciating assets except those specifically excluded
    • apply the entire set of rules, not just individual elements (such as the instant asset write-off)
    • only claim a deduction for the portion of the asset used for business or other taxable purposes – not for the portion for private use.

    If you choose to stop using the simplified depreciation rules or become ineligible to use them, you'll need to use the general depreciation rules.

    Find out about:

    See also:

      Last modified: 23 Jun 2020QC 21100