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  • Capital allowances: low-cost assets – threshold rule for small business

    The threshold rule allows you to claim an immediate deduction for most business expenditure of $100 or less to buy tangible assets.

    The rule is meant to help you save time because you don't need to decide whether each purchase is of a revenue nature (and so immediately deductible) or of a capital nature (usually written-off over time).

    Purchases of a revenue nature normally mean that you expect the item to be consumed, damaged or lost within a short period of time while purchases of a capital nature generally result in the item or asset being used over a longer period.

    If you are using the simplified depreciation rules, generally you won't use the threshold rule that applies for tax administrative purposes, to low cost items of $100 or less.

    Under these rules, from 7.30pm (AEST) on 12 May 2015 until 30 June 2019 you:

    • immediately deduct the business portion of most depreciating assets that cost less than $20,000 each in the year you bought and used, or installed ready for use
    • pool the business portion of most other depreciating assets that cost $20,000 or more in a small business asset pool and claim    
      • a 15% deduction in the first year (regardless of when you purchased or acquired them during the year)
      • a 30% deduction each year after the first year
    • write-off the balance of your small business pool at the end of an income year if the balance, before applying any other depreciation deduction, is less than $20,000.

    You can use the simplified depreciation rules if you are a small business entity (2007–08 and later years).

    You must use the simplified depreciation rules for income years where you were in the simplified tax system (2006–07 and earlier years).

    See also:

      Last modified: 26 Sep 2018QC 17149