Small business depreciation rule changes

21 October 2011

The Government has released exposure draft legislation and explanatory materials for the proposed changes to the depreciating rules for small business entities from 1 July 2012. The changes simplifying the existing depreciation rules for small business entities and provide a greater up-front tax benefit when new depreciating assets are acquired. The changes include:

• An immediate write-off for any depreciating assets that cost less than $6,500. Remember that for small business entities, there is no requirement to aggregate identical assets for depreciation purposes, hence this represents a substantial immediate deduction for small business clients;
• An immediate write-off of $5,000 for any motor vehicle acquired from 1 July 2012. The new rules will mean that the purchase of a motor vehicle results in a $5,000 deduction and 15% general pool depreciation deduction in the first year. The remaining written down value of the asset would be depreciated at 30% in subsequent years; and
• Removal of the long-life pool, resulting in a single depreciation rate of 30% for all assets held by small business

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