If you are a primary producer and are a small business entity, you can choose to access the small business entity concessions that suit your business. You will have to review your eligibility for the concessions each tax year and you may need to satisfy other conditions that apply to a particular concession.
If you are a primary producer and would be a small business entity if the aggregated turnover threshold was less than $50 million, you can choose to immediately deduct prepaid expenses.
A small business entity may be a sole trader, partnership, company or trust. You can get the latest news and information for small businesses by subscribing to the ATO small business newsroom.
See also:
- Eligibility for the small business entity concessions
- Small business entity concessions
- What's new for small business
- Small business newsroom
In this section:
Simplified trading stock
Small business entities only need to conduct stocktakes and account for changes in the value of trading stock in limited circumstances (see Stock on hand).
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Prepaid expenses
Small business entities and entities that would have been small business entities if the aggregated turnover threshold was less than $50 million can claim an immediate deduction for certain prepaid expenses.
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Simplified depreciation rules
If you are an eligible small business entity you may choose to calculate deductions for your depreciating assets using the simplified depreciation rules. These rules include:
- an instant asset write-off for assets that cost less than the relevant threshold
- a general small business pool for assets that cost the same or more than the relevant threshold, which has simplified calculations to work out the depreciation deduction.
A small number of assets are excluded from the simplified depreciation rules and a car limit applies to the cost of passenger vehicles.
If you are a small business entity choosing to use simplified depreciation, the temporary full expensing rules with some modifications apply. You cannot opt out of temporary full expensing for assets that the simplified depreciation rules apply to.
If instant asset write-off and temporary full expensing do not apply to an asset of a small business using simplified depreciation, the backing business investment rules may apply to the asset. If backing business investment rules apply to the asset of a small business using simplified depreciation, it cannot opt out of those rules.
A small business using simplified depreciation must also deduct the balance of their general small business pool for an income year ending between 6 October 2020 and 30 June 2022.
Under the small business entity depreciation rules, the 'taxable purpose proportion' (which includes the proportion the asset is used in your income-earning activities) of the adjustable value and some other costs (see Depreciating assets generally) of most assets can be deducted. Under these rules:
For each depreciating you purchased any time from 7.30pm (AEST) on 12 May 2015 to before 7.30pm (AEDT) on 6 October 2020 and first used or installed ready for use for a taxable purpose such as for producing assessable income in 2020-21:
- you deduct the business portion of eligible depreciating assets costing less than $150,000 each (excluding input tax credit entitlements) under instant asset write-off.
For assets you start to hold, and first use (or have installed ready for use) for a taxable purpose any time between 7.30pm (AEDT) 6 October 2020 and 30 June 2022, the instant asset write-off threshold does not apply. You must immediately deduct the business portion of the asset's cost under temporary full expensing.
Under temporary full expensing, you must also claim a deduction for the cost of improvements made from 7.30pm (AEDT) on 6 October 2020 to 30 June 2022 to an asset that you have written off under the simplified depreciation rules (including instant asset write-off) in an earlier income year, provided you have not previously claimed improvement costs to the asset.
If you cease to be a small business entity, or if you choose to stop using the simplified depreciation rules, the rules continue to apply to assets in the general small business pool for the 2021 and later income years. For income years ending between 6 October 2020 and 30 June 2022 you deduct the balance of your small business pool at the end of the income year. Depreciating assets you start to use, or start to have installed ready for use, cannot be added to the general small business pool until an income year in which you are a small business entity or choose to use the simplified depreciation rules.
A small business entity can choose to claim deductions under either the simplified depreciation rules or the uniform capital allowance (UCA) rules for certain depreciating assets used in the course of carrying on a business of primary production. The choice is available for water facilities, fencing assets, fodder storage assets and depreciating assets relating to landcare operations, electricity connections and telephone lines. Once you have made the choice it cannot be changed.
For horticultural plants (including grapevines) you must use the UCA provisions.
See also:
- Guide to depreciating assets 2021
- Simpler depreciation for small business
- Temporary full expensing
- Backing business investment
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