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Edited version of your written advice
Authorisation Number: 1013069088187
Date of advice: 9 August 2016
Ruling
Subject: Business - depreciation
Question
Are you entitled to claim the asset write off on capital purchases up to $20,000?
Answer
Yes
This ruling applies for the following period(s)
Year ended 30 June 2016
The scheme commences on
1 July 2015
Relevant facts and circumstances
You operate a small business (under $2m turnover).
In 20XX the business commenced.
A large machine was purchased and installed in the premises in 20XX.
The trust has paid rent for the machine since 20XX.
The trust has now approached the owners of the machine to purchase the machine at its depreciated price, which is less than $20,000.
The machine is used solely for the business.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 40-30
Income Tax Assessment Act 1997 subsection 328-175(10)
Reasons for decision
You can choose to use simplified depreciation rules if you have a small business with an aggregated turnover of less than $2 million.
Under these simpler rules, you:
• claim an immediate deduction for most depreciating assets that cost less than $20,000 each that was acquired and installed ready for use from 7.30pm (AEST) on 12 May 2015 until the end of 30 June 2017
• pool most other depreciating assets into a general small business asset pool and
– claim a 15% deduction in the first year (regardless of when you purchased or acquired them during the year)
– claim a diminishing value rate of 30% deduction on the opening pool balance each year after the first year (regardless of their effective life)
– deduct the balance of your general small business pool at the end of an income year if the balance of the pool at the end of the year is less than $20,000.
Aggregated annual turnover means the total normal sales of your business and that of any associated businesses.
Application to your circumstances
In this case, as your turnover is less than $2 million, you are entitled to apply the simplified depreciate rules outlined above, including claiming an immediate deduction for a depreciating assets that cost less than $20,000.
Note that for certain depreciating assets, you must use the normal depreciation rules rather than these simpler rules. You cannot use the simpler depreciation rules for:
• assets you rent or lease, or are expected to be leased out, to others for more than 50% of the time on a depreciating asset lease
• assets allocated to a low-value pool
• horticultural plants, including grapevines
• in-house software where development expenditure is allocated to a software development pool
• capital works
• research and development.
For more information, search for Quick Code (QC) 33726 at www.ato.gov.au.
Note if you later sell or dispose of an asset for which you claimed an instant asset write-off, you include the taxable purpose proportion of the amount you received for the asset in your assessable income.
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