Workout if you can access small business entity concessions that suit your business.
Choosing to access the small business entity concessions
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.
A small business entity may be a sole trader, partnership, company or trust. You can get the latest small business news and information by subscribing to the ATO small business newsroom.
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).
For more information, see Oyster farmers: calculating the value of trading stock.
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.
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.
However, small businesses using the simplified depreciation rules cannot apply the instant asset write-off threshold for assets you start to hold, and first use (or have installed ready for use) for a taxable purpose from 7.30pm (AEDT) on 6 October 2020 to 30 June 2023.
Instead, 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 2023 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.
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 2023.
You cannot opt out of temporary full expensing for assets that the simplified depreciation rules apply to unless you opt out of the simplified depreciation rules.
Small business entities that have previously elected out of the simplified depreciation rules are no longer subject to the ‘lock-out’ rule (which prevented small businesses from re-entering the simplified depreciation regime for five years if they had opted out). These entities may re-elect to use the simplified depreciation rules.
The suspension of the five year restriction only applies from 12 May 2015 to the end of an income year that includes 30 June 2023. 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 2021–22 and later income years.
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 that choice, it cannot be changed. If you choose to use the simplified depreciation provisions with respect to certain primary production assets, then you must use both the immediate write-off (including temporary full expensing) and the pooling where applicable.
For horticultural plants (including grapevines), use the UCA provisions.
Continue to: Depreciating assets and capital expenditure