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small business writeoff

Claiming the $20K Small Business Writeoff

We have had a vast amount of enquiries in relation to the new immediate deduction amount of $20,000 that was introduced in the 2015/2016 budget.

The 20K small business writeoff generous but you need to keep in mind that you need to meet the set conditions to take advantage of it.

What are the set conditions to claim?:

  • Applies from 7.30pm (AEST) 12 May 2015 up until 30 June 2017
  • You must run a small business with aggregate annual turnover of less than $2 million
  • You can purchase new or used* single items costing less than $20,000 and claim an immediate deduction. If you are registered for GST this is the GST exclusive amount.
  • If you purchase an asset that is valued $20,000 or more than you would depreciate it in a pool, first year being 15% and then 30% year thereafter. If the value of the pool is below $20,000 until the end of June 2017 it can be immediately deducted too.
  • Businesses need to ensure that they only claim a deduction to the extent to which the asset is used in an income earning activity.

Below are the two most common questions we have received since the budget was released.

Q: If I purchase a MV for the value of $50000, however I traded my old MV for $32000 hence making the changeover price $18,000, can I immediately deduct this?
A: No, you cannot claim the immediate deduction. Per the budget it states that the ASSET ITSELF has to be less then $20,000. Hence in regards to the question above what would happen is that the MV would be put through a depreciation schedule as the vehicle itself is worth more than $20,000 ($50000).
Q: If I am registered for GST and purchased an asset for $22,000 inclusive of GST and claimed the GST credit of $2000 ($22000/11) would I still be able to claim the $20,000 immediate deduction as the net price of the asset is $20000.
A: You would NOT be able to claim the deduction as the net value of the asset is $20,000. The asset needs to be LESS than $20000 i.e. $19999.

*All Assets (Including new and second hand) will be eligible, except for a small number of exclusions which receive different depreciation treatment.

Excluded assets include;

  • Horticultural plants – subject to their own ‘uniform capital allowance’ rules (UCA);
  • Capital works – subject to there own ‘capital works’ depreciation rules;
  • 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 rules; and
  • Assets leased out to another party on a depreciation asset lease