Following the 2015-16 Federal Budget, small business entities may now immediately deduct each depreciating asset costing less than $20,000 acquired between 7.30 p.m. (ACT legal time) on 12 May 2015 and 30 June 2017.
Small business means a ‘small business entity’, which is an individual, partnership, trust or company with an aggregated turnover of less than $2 million. It is important to note that the aggregated turnover also includes the annual turnover of any entities connected with and/or affiliated with the taxpayer.
The deduction is claimed in the relevant income year for which the asset is first used or installed ready for use for income producing purposes between that time period.
The $20,000 threshold applies to the GST exclusive value of the asset. That means, for a business which is registered for GST, the GST exclusive cost of the asset must be below the $20,000 threshold for the immediate write off to apply.
Both new and second-hand assets are eligible for the immediate write-off, except for a number of asset categories which have their own depreciation treatment for tax purposes (ie capital works, assets allocated to a low value pool or software development pool, assets leased out to another party on a depreciating asset lease etc)
As has been the case, the deduction is only available to the taxable purpose proportion of the asset. Broadly speaking, the taxable purpose proportion of the asset represents the proportion of an asset’s use that is for income producing purposes.
If you are unsure about claiming deductions, be assured that our office can assist you in preparing your tax return and provide you the right advice towards minimizing your tax.
By Pammy Huen