Accelerated depreciation for small business gets extended

In the 2015-16 federal budget, the government increased the small business immediate deductibility threshold from $1,000 to $20,000, which was originally due to end at June 30, 2017.

But a law amendment bill has recently been passed by Parliament (here it is) that extends that measure by 12 months until June 30, 2018, after which the deductibility threshold will revert to $1,000.

At the time of the original announcement, small businesses were defined as having an aggregate annual turnover of less than $2 million. Announcements from the most recent federal budget however, and the new legislation, make it clear that the depreciation measure will not only be extended for a year but also extend to businesses with an aggregated annual turnover of less than $10 million.

Small businesses can therefore continue to immediately deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by June 30, 2018. Only a few assets are not eligible (such as horticultural plants and in-house software).

Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into a small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter. The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools).

The current “lock out” laws for the simplified depreciation rules (these prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out) will continue to be suspended until June 30, 2018.

 

Accelerated depreciation for small business gets extended Accelerated depreciation for small business gets extended Accelerated depreciation for small business gets extended