• Simplified depreciation rules

    You can choose to use simplified depreciation rules if you are a small business.

    Under these simpler rules, you:

    • immediately write-off the total cost of most eligible and depreciating assets that cost less than the immediate write-off threshold for certain depreciating assets
    • pool most other depreciating assets in a pool and claim    
      • a 15% deduction in the first year, regardless of when you purchase or acquire them during the year
      • a 30% deduction each year after the first year, regardless of their effective life
    • write-off the balance of the small business pool if the balance is less than the immediate write-off threshold (before calculating any deductions) at the end of an income year.

    If you choose to use the simplified depreciation rules, you must use them all for your depreciating assets. Please note that there are a few assets that are specifically excluded.

    To be eligible, the asset must be installed and ready-for-use in the year you want to claim the deduction. For example, a trailer that was purchased and stored in the shed but not yet fitted out for the intended business purpose would not be eligible.

    If you are registered for the goods and services tax (GST), you exclude the GST amount you paid on the asset when you calculate your depreciation amounts. This is because you will claim as a credit the GST paid in your activity statement for the relevant period. The following examples assume your business is registered for GST.

    If you are not registered for GST, you will need to include the GST amount you paid on the asset in your depreciation calculations.

    If you receive income that is not from your business, such as salary and wages; you claim a deduction for all depreciating assets you use in earning your employment income under these simplified depreciation rules.

    • Last modified: 15 Jan 2016QC 21100