Businesses with a turnover of less than $2 million pa have two choices in calculating their deductions for depreciating assets – the simplified depreciation rules or the uniform capital allowance rules. The simplified depreciation rules are very attractive as they allow an immediate write-off for assets costing less than $20,000. In contrast, under the uniform capital allowance rules assets costing more than $100 need to be depreciated over their effective life.

The simplified depreciation rules allow:

  • Immediate write-off for depreciating assets costing less than $20,000 (from 12th May 2015 to 30th June 2017).
  • Pooling the other depreciating assets in the general pool and depreciating at 15% diminishing value rate in the first year, and 30% thereafter.

If the general pool balance at 30th June 2016 or 30th June 2017 is below $20,000, then small business entities (SBE) can write it off as a deduction.

For example, if a taxpayer (SBE company) purchased a new custom fitted van for $20,000 in the 2015 tax year which was used 100% for business use; the asset was allocated to the SBE general business pool resulting in a deduction of $3000 ($20,000 x 15%) with a closing pool balance of $17,000. The company had no other assets in the general small business pool, nor did it make any further depreciating asset purchases during the 2016 income year.

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