Small business simplified depreciation rules
Scenario:
I own a business with an annual turnover of $4 million for both the 2016 and 2017 financial years. For the 2017 financial years, am I eligible to apply the small business simplified depreciation rules? If yes, and I have individual assets with a written down value below $20,000 on July 1, 2016, can these assets be immediately written off or do all assets need to be allocated to the general pool?
Explanation:
From July 1, 2016, the small business turnover threshold has increased from $2 million to $10 million. This means that if the entity aggregate turnover less than $10 million, the entity could use the simplified depreciation rules for small businesses. Under this rule, a small business can write off the balance of the small business pool at the end of an income year. If the balance is less than $20,000 before applying any other depreciation deduction. The figure applies to the total of all assets – so if all assets have a balance of less than $20,000. The whole pool can be written off. If individual assets have a balance less than $20,000 but the cumulative total for the pool is more than $20,000, the pool cannot be written off. Instead, these assets must be allocated to a small business pool at their current down value and then depreciated at 30% per year until the pool balance is less than $20,000.