The $20 000 write off – what you need to know
As a small business owner, you’ve probably heard about the 2015 Budget changes to instant asset write-offs.
To help you understand what the changes can mean for your small business, we’ve put together some key facts.
What has changed as a result of the 2015 Budget?
Under the changes to simplified depreciation rules for small business, you can:
immediately write off eligible depreciating assets costing less than $20,000 each, as long as you buy them and install them ready for use from 7.30pm on 12 May 2015 until 30 June 2017.
immediately write off a small business asset pool (including existing pools) if the balance is less than $20,000at the end of a financial year, until 30 June 2017.
choose to use simplified depreciation rules even if you opted out in the last five years. This took effect at 7.30pm on 12 May 2015 and will end on 30 June 2017.
If you’re a primary producer, you can:
immediately deduct the cost of fencing and water facilities (such as dams, tanks, bores, pumps, etc.)
depreciate over three years the cost of fodder storage assets (such as silos and tanks that you use to store grain and other animal feed).
These changes apply to eligible assets that you buy from 7.30pm on 12 May 2015. Find out more about thechanges to accelerated depreciation for primary producers .
When do these changes take effect?
These changes are in effect now. The new laws were passed on 22 June 2015.
How is it different to before?
Before the changes, under simplified depreciation rules:
you could only immediately write off eligible depreciating assets that cost less than $1000 each
you could only immediately write off a small business asset pool if the balance was less than $1000 at the end of a financial year
if you opted out of the simplified depreciation rules, you had to wait five years before you could use them again.
Before the changes, primary producers could claim the costs of:
fences over a period of up to 30 years
water facilities over 3 years
fodder storage assets over a period of up to 50 years.
Will these changes apply to all businesses?
No. The simplified depreciation rules only apply to businesses with a turnover of less than $2 million.
Sole traders and partnerships - if total tax deductions for your business is greater than the income from your business (that is, your business makes a loss), you may be eligible to offset the loss against your other income (such as salary and wages). There are some conditions you’ll need to meet to be eligible – read non-commercial losses on the ATO website for more information.
Do I get my money back straight away?
No. ‘Immediate’, ‘instant’, or ‘straight away’ means that you can claim the cost of depreciating assets in the financial year that you first used or installed them ready for use. By claiming the deductions, you reduce your taxable income, and your tax payable.
You don’t get cash back from the tax office straight away.
What can I write off?
You can only write off eligible depreciating assets that cost less than $20,000 and that you use for business purposes.
Depreciating assets include items such as computers, electrical tools, furniture, curtains, carpets and cars.
Land and trading stock are not depreciating assets.
Note that certain types of depreciating assets can’t be written off under simplified depreciation rules, including horticultural plants, capital works, and software.
Read the full list of exclusions to the simplified depreciation rules .
Do I need to keep any records?
You need to keep records of depreciating assets if you claim deductions for them. These records need to be kept for at least 5 years.
How can I find out more about these changes?
Visit the ATO website for more on expanding accelerated depreciation for small business or call the ATO on 13 28 66.