UPDATE: Immediate Write-off and Small Business Pooling

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GREAT NEWS: The Australian Taxation Office (ATO) has made further changes to the rulings surrounding immediate write-off and pooling of small business assets.

If you’re a small business owner (and/or Commercial property investor) … read on to find out how these changes affect you.

What Has Changed?

Simplified depreciation rules were introduced at the end of the financial year 2012-2013 which increased the immediate write-off threshold for small business owners from $1,000 to $6,500.

This change has now been reversed, meaning small business owners can now claim an immediate write-off for assets which cost $1,000 or less.

Assets costing less than $6,500 acquired and installed ready for use by a small business between the 1st of July 2013 and the 31st of December will still be eligible to be immediately written-off.

Assets above the $1,000 immediate write-off installed ready for use after the 1st of January 2014 can still be allocated to a general small business pool to maximise depreciation deductions for the owner.

What Does It Mean For You?

By adding assets to the general small business pool, investors will be able to claim these assets at an increased depreciation rate of fifteen per cent in the year of purchase and thirty per cent for subsequent years after.

To be eligible for the immediate write-off and the general small business pool the entity (individual, partnership or trust) must have an aggregated turnover of less than $2 million.

Although there is no upper limit to the cost of assets that can be applied to the new general small business pool, there are some prerequisites which apply according to the latest ATO advice.

Exceptions to the Rule

For the immediate-write off and the general small business pool to apply, assets must not fall into the category of excluded assets.

Some examples of assets which may be excluded from the new small business $1,000 immediate write-off threshold or the updated general small business pool according to the ATO include:

  • Assets rented or leased to others;
  • Assets that have been allocated to a low-value pool prior to the introduction of the new simplified depreciation rules in July 2013 (these assets will continue to be claimed via the low-value pooling method);
  • Horticultural plants including grapevines;
  • Software that has been allocated to a software development pool prior to the introduction of the new simplified depreciation rules in July 2013;
  • Any structural items (such as walls, ceilings, roofs, etc0 would be depreciated as capital works deductions.

As you can see, excluded assets may be deductible under other existing income tax laws.

BOTTOM LINE: To ensure an asset is claimed correctly under the relevant method in effect at the time the asset is installed ready for use, make sure to contact a specialist Quantity Surveyor, such as BMT Tax Depreciation.

They can arrange a tax depreciation schedule which will make the process much less complicated for small business owners. A BMT Tax Depreciation Schedule will outline the deductions for pooled assets appropriately so that the right deductions are claimed every time.


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