Instant asset write-off being extended to 30 June 2017.
“If you acquire a motor vehicle for less than $20,000, the whole of the car cost can be instantly written off”
With the $20,000 temporary instant asset write-off possibly being extended to businesses with an aggregated annual turnover of less than $10 million following the announcement on Budget night, it’s a good opportunity for eligible small businesses to review their capital expenditure budgets. The write-off can provide businesses with some cash benefit. For example, a business with an effective tax rate of 30% can receive up to $5,999 as a tax refund if an asset costing less than $20,000 is purchased. Cars are a big ticket item so it’s timely to revisit which models are eligible. We list below a non-exhaustive list of vehicles with a drive-away price of less than $20,000. This will temporarily replace the previous instant asset write-off threshold of $1,000.
This measure starts 7.30pm (AEST) 12 May 2015 and will end on 30 June 2017.
The balance of the general small business pool is also immediately deducted if the balance is less than $20,000 at the end of an income year that ends on or after 12 May 2015 and on or before 30 June 2017 (including existing general small business pool).
The current ‘lock out’ laws will also be suspended for the simplified depreciation rules (these prevent small businesses from re-entering the simplified depreciation regime for five years if they have opted out) until the end of 30 June 2017.
Assets excluded from these depreciation rules include horticultural plants and in-house software allocated to a software development pool. In most cases specific depreciation rules apply to these excluded assets.
Assets that cost $20,000 or more (which can’t be immediately deducted under other provisions) are deducted over time using the general small business pool. Under the pooling mechanism a deduction for 15 per cent of the cost is allowed in the first income year with a diminishing value rate of 30 per cent deduction on the opening pool balance allowed for each income year thereafter.
The new laws also include changes to allow primary producers to immediately deduct capital expenditure on fencing and water facilities such as dams, tanks, bores, irrigation channels, pumps, water towers and windmills.
Legislation and supporting material
Tax Laws Amendment (Small Business Measures No.2) Act 2015