Small Business Tax Deductions 2015

INFORMATION ALERT

Small Business
Tax Deductions 2015

Buy Now Up To $20,000 (Per Item)

The Australian Government announced a new measure for small business with immediate deductibility for assets less than $20.000 in the 2015 Budget on 12 May 2015.

The measure will require legislation and will apply for the period from 7:30pm on 12 May 2015 until the end of June 2017.

As this law change will be retrospective if enacted, it is important that small businesses understand their obligations under both the existing and proposed laws.

Importantly, under the announced new measure, small business will need to keep records of their purchases to claim their deduction once the law is enacted.

Is The Measure Law Yet?

No, the law to give effect to the changes has not been enacted yet. For further updates refer to the Australian Taxation Office website, as the measure progresses through the parliamentary process at the web address noted below.

Who Is Eligible?

Any business that meets the definition of small business entity that is one with an aggregated turnover of less than $2 million may be eligible for the immediate deductibility of assets costing less than $20,000.

What Is The Current Law?

Small businesses can elect to use the “simplified depreciation rules”. These rules allow small businesses to immediately deduct assets costing less than $1000. Any assets of $1000 and over can be added together (‘pooled’) and depreciated at the same rate. These assets are depreciated at 15% in the first income year and 30% per year thereafter.

What Is Changing?

The thresholds for immediate deductibility will be raised to $20,000 from 7:30pm 12 May 2015. The increased threshold is proposed to apply until 30 June 2017. The threshold for the low pool value rules will also be increased to $20,000.

What Does This Mean?

This means that a small business will be able to immediately deduct each and every asset they purchase with a cost below $20,000. These changes are intended to apply for the period from 7:30pm 12 May 2015 to 30 June 2017.

Are All Assets Eligible?

All assets are eligible except for a small number of exclusions which receive different depreciation treatment. These assets include:

  • Horticultural Plants – subject to their own “uniform capital allowance” rules (UCA),
  • Capital Works – subject to their own “capital works” depreciation rule,
  • Assets allocated to a low – value or software depreciation pool – subject to the depreciation rules under those pools,
  • Primary Production Assets – you can choose to use the specific UCA rules or accelerated depreciation,
  • Assets leased out to another party on a depreciating asset lease.

How Can I Find Out More About Current Rules and Eligible Assets?

For information about the operation of the current rules and assets that are eligible to be deducted under the current instant asset write-off threshold you can ring 13 28 66 or visit:

https://www.ato.gov.au/General/New-legislation/In-detail/Direct-taxes/Income-tax-for-businesses/Small-Business—expanding-accelerated-depreciation/

Financial Disclosure

This information is supplied in a best effort to help inform people of potential options and is not to be relied upon as financial advice; Rising Connection Pty Ltd does advise that you consult with your own qualified accountant and Australian taxation advisor before making financial decisions based on this information or any other information in relation to financial and taxation matters (the above is based on information as at the 25 May 2015).

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