Increased deductions for small businesses​

New legislation kicking off from 1 July 2012 will allow an increase in the small business instant asset write-off threshold and the deduction available to small business entities (SBEs) purchasing new motor vehicles.

The changes are a result of amendments made to the Income Tax Assessment Act 1997.

Instant Asset Write-Off Threshold

The small business instant write-off threshold will increase from $1,000 to $6,500 (GST exclusive). This will allow small businesses with an aggregated turnover of less than $2 million per annum to claim a 100% deduction for all depreciable assets costing up to $6,500 that a SBE purchases and uses in its business.  Traditionally, those assets costing $1,000 or more would be allocated to the appropriate small business pool and depreciated using the method relevant for that pool.

Assets purchased by SBEs for more than $6,500 (GST exclusive) can now be placed in an asset pool and depreciate at a rate of 15 per cent in the first year and 30 per cent per year thereafter.  Previously, there were two depreciation pools for SBEs – a “long-life small business pool” and a “general small business pool” that had different depreciation rates depending on which pool the asset was allocated to.

Deduction available to SBEs purchasing new motor vehicles

Small businesses that purchase motor vehicles will be able to claim an immediate write-off of $5,000 for motor vehicles acquired during the 2012 – 13 year with the remainder of the motor vehicle value being included in the asset pool with a depreciation rate of 30%.