Contrary to popular belief, the ATO’s $20,000 write off is not actually new, it is simply an increased threshold of the existing $1,000 immediate write off for small business.
The proposed enactment applies to assets acquired from 12 May 2015 until 30 June 2017.
In order to be eligible for the small business concessions, your business must comply with the following conditions:
- Turnover less than $2 million dollars (for entity and associated/related entities)
- Must be an active business, not just holding assets for the purposes of investing
The asset itself must be less than $20,000 exclusive of GST (this includes installation costs, add ons etc), both new and second hand assets may be eligible for the immediate write off.
Assets not included in the $20,000 immediate write off include:
- Horticulture plants
- Capital works assets
- Assets allocated to low value pool or software development pools
- Primary production assets for which the entity does not elect to use simplified depreciation rules
- Assets leased out to another party on a depreciating asset lease
Any asset which itself is over $20,000 may be added to a small business pool which is depreciated at 15% in the first year and 30% for subsequent years (years relate to length of time an asset exists within the pool).
Should the pool itself have a value under $20,000 the entire pool itself may be written off.
Other changes to the legislation, are as follows:
- Removal of accelerated motor vehicle deduction
- Removal of simplified tax system lockout
- 1.5% tax discount for incorporated entities
- 5% discount on tax payable for eligible unincorporated entities (capped at $1,000 for each individual)
The largest issue with the proposed enactment is that the enactment has not yet been passed (although it relates to assets acquired in the past). In order to avoid another government blunder (ie the previous $6,000 immediate write – off being retrospectively removed (expecting clients to ammend and re-lodge their returns)) changes must be made at a government level to the current taxation policy writers. Feel free to vote for your favourite tax accountant in Melbourne next election in order to have a fairer taxation system for everyone.