ACCELERATED DEPRECIATION CHANGE – YOUR QUESTIONS ANSWERED
To Whom Does it Apply?
The increased threshold applies to Small Business Entities (SBE) i.e. those carrying on a business with an aggregated turnover of less than $2 million, including the turnover of any affiliated or connected entities.
Also, on Budget Night, it was announced that the current rules preventing an SBE from using the simplified depreciation regime for five years if it opts out of the regime will be suspended until 30 June 2017. Therefore if in the last few years you opted out of the simplified depreciation regime but wish to re-join and thus take advantage of this new $20,000 instant write-off threshold you are free to do so.
When Does It Apply?
The increased threshold is to be applied to assets purchased and installed ready for use from 7:30pm 12 May 2015 to 30 June 2017.
What Type of Assets?
The new threshold applies to any type of depreciableasset, used or second-hand. The only depreciable assets excluded are those that have their own unique depreciation treatment such as horticultural plants, capital works etc.
The cost of the asset must be below $20,000 (not the business use proportion of the asset). Therefore, a $25,000 vehicle with a 50% business use is ineligible.
For SBE registered for GST, the threshold is $22,000 (including GST).
For SBE unregistered, the threshold is $20,000 (including GST).
What about Other Assets?
Normal small business depreciation rules will continue to apply to assets exceeding these thresholds. That is, the SBE can elect to use the pooling arrangements and depreciate the cost of such assets at 15% in the first year and 30% each year thereafter. The low pool value threshold will also increase to $20,000. This means that an immediate deduction is available if the pool balance is less than $20,000 at the end of an income year that ends on or after 12 May 2015 but on or before 30 June 2017.
Under this change, many more assets will be eligible to be written-off in the year of purchase. For all assets purchased, the appropriate general ledger codes should be applied and assets should be properly described.
Thanks to the Australian Bookkeepers Network for this article.