Eligibility for concessions
Small business entities may qualify for a range of tax concessions. You're a small business entity for an income year if both of the following apply:
- you carry on a business in that year
- you have an aggregated turnover of less than $10 million.
The aggregation rules use the concepts of ‘connected with’ (which is based on control) and ‘affiliates’ to determine whether the turnover of any related business needs to be included in the aggregated turnover of your business.
Businesses that aren't small businesses because their aggregated turnover is $10 million or more but less than $50 million can access an immediate deduction for certain start-up expenses and for prepaid expenditure.
If you're a small business entity, you may be eligible for small business deductions such as the following.
Simplified depreciation rules
If you're an eligible small business entity, you may choose to calculate deductions for your depreciating assets using these rules.
Small business entities can claim an immediate deduction for eligible depreciating assets under the instant asset write-off limit.
For an asset which you claim a deduction under the simplified depreciation rules in a prior income year, small businesses can also immediately deduct an amount included in the second element (cost addition) of that asset's cost, where the amount is:
- the first deductible amount of second element cost you incur after the end of the income year the asset was written off
- less than the instant asset write-off limit
- incurred between 1 July 2024 and 30 June 2025
Other depreciating assets and cost additions are pooled in a general small business pool and deducted at the rate of 30%. Newly acquired assets are deducted at 15% (half the pool rate) in the first year, regardless of when they were acquired during the year.
The limit at which a small business writes off the total balance of the general small business pool is aligned with the relevant instant write-off limit.
There have been changes to the instant asset write-off limit over recent years. See, Small business support – instant asset write off.
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 (for example, you can't opt out of instant asset write-off)
- only claim a deduction for the portion of the asset you use for business or other taxable purposes and not for the portion for private use.
If you don't want to apply the instant asset write-off, you need to opt out of the simplified depreciation rules for the 2024–25 income year.
If you choose to opt out of the simplified depreciation rules, for assets you allocate to the general small business pool, you must continue to apply the simplified depreciation rules.
A small number of assets are excluded from the simplified depreciation rules and a car limit applies to the cost of passenger vehicles.
5-year lock out rule
The 5-year 'lock out' rule is suspended until 30 June 2025. This rule prevented small business entities from re-entering the simplified depreciation regime if they opted out.
If you are a small business entity that had previously chosen to use these simplified depreciation rules but in a later year chose to stop using this concession, you can again choose to use the simplified depreciation rules until 30 June 2025.
To notify us of your choice, lodge your tax return and keep relevant records for the required period of time. You don't need to lodge any other form to notify us of your choice.
For more information, see Simpler depreciation for small business.
Rollover relief
As part of the small business tax concessions, you may be able to defer any gain or loss resulting from a transfer of a depreciating asset between entities with the same economic ownership under the small business restructure rollover concessions, which apply from 1 July 2016.
Modifications, under the Commissioner's remedial power, may apply to the asset disposal to prevent unintended tax consequences where both:
- a transfer takes place on or after 8 May 2018
- the asset you transfer satisfies conditions under a small business restructure rollover.
For more information, see:
- Small business restructure rollover
- Commissioner's remedial power CRP 2017/2 Taxation Administration (Remedial Power – Small Business Restructure Roll-over) Determination 2017.
Continue to: Certain start-up expenses immediately deductible
Return to: Capital expenditure deductible under UCA