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  • Small business entities

    Recent changes to the law temporarily increase the threshold for assets that can be immediately written off from $1,000 to $20,000. This change applies to:

    • assets that were first acquired at or after 7.30pm AEST of 12 May 2015, and
    • first used or installed ready for use on or before 30 June 2018.

    Assets that do not satisfy these timing requirements continue to be subject to the $1,000 threshold.

    For more information see Small business entity concessions.

    Eligibility

    You are eligible to be a small business entity for an income year if:

    • you carry on a business in that year, and
    • you have an aggregated turnover of less than $10 million.

    Similarly to the previous grouping rules that existed under the former simplified tax system, the new aggregation rules use the concepts of ‘connected with’ (which is based on control) and ‘affiliates’ to determine whether the turnover of any related businesses need to be included in the aggregated turnover of your business.

    It is not necessary to specifically elect to be an eligible small business each year in order to access the concessions. However, you must assess your eligibility for the concessions each year.

    Simplified depreciation rules

    If you are an eligible small business, you may choose to calculate deductions for your depreciating assets using these rules.

    In general, the taxable purpose proportions of the adjustable values and second element of cost amounts of most:

    • depreciating assets costing less than $20,000 each can be written off immediately
    • other depreciating assets 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 threshold at which a small business writes off the total balance of the general small business pool is aligned with the instant write-off threshold of $20,000.

    The taxable purpose proportion is your reasonable estimate of the proportion you will use, or have installed ready for use, a particular depreciating asset for a taxable purpose.

    If you are eligible, and choose to continue to use the simplified depreciation rules, you will continue to include any new depreciating assets in the relevant pool. If you choose not to use the simplified depreciation rules you cannot add any new assets to those pools. You can alternatively account for those assets under the UCA rules; see Small business entity concessions.

    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 roll-over concessions, which apply from 1 July 2016. For more information, see Applying the small business restructure rollover.

    Last modified: 31 May 2018QC 55221