The new rules on Simplified Depreciation were effective from 1 July 2012 and are significantly advantageous to small business enterprise taxpayers. These taxpayers are defined as conducting a business and have less than $2 million of net turnover in a financial year.
These rules are not applicable to rental property assets, assets in the low value pool, software development assets, capital works for property and horticultural plants.
The rules allow an instant write-off of assets, increasing the threshold from $1,000 to $6,500. It is applicable on an asset basis (not an aggregate of similar assets). For motor vehicles bought in 2012/13, there is an instant deduction of up to $5,000. It is not necessary that the vehicle is primarily used for business purposes. In addition, the definition for motor vehicles is very broad and it includes second-hand vehicles.
For new and existing pool of assets, the depreciation is claimed at the rate of 15% on the first year and 30% on remaining years’ pool balance. For effective tax planning, you can consider to acquire assets before 30 June to take advantage of the changes to the Simplified Depreciation legislation.
It is very important that you fulfil the definition of a small business enterprise taxpayer, therefore please talk to us to confirm your position.