How Small Business Depreciation Rules Have Changed In 2012/2013

Calculating depreciation is one of the reasons most small businesses hire accountants, and we're certainly not advising against that. However, changes to the depreciation rules in 2012-2013 mean it might make sense for you to purchase more expensive items before the year is out.

Notebook picture from Shutterstock

Beginning with the 2012-2013 tax year, businesses with a turnover of under $2 million can instantly write off any depreciating assets which cost $6500 or less. From a technology standpoint, that means that virtually any laptop you purchase can be written off immediately, rather than over a number of years. Many server systems would also fall under that threshold.

The limit applies to each individual item; if you purchased four $3000 notebooks for work, they would all be immediately written off, rather than being depreciated over a period of three or four years.

You still need to write off higher-priced assets over a number of years, but the rules are also simpler there; assets are added to a general pool and depreciated at 15 per cent for the first year and 30 per cent for each subsequent year. Motor vehicles used for business can claim depreciation of $5000 plus 15 per cent of the total value in the first year.

Again, once you're running a business an accountant is a good idea, but it's helpful to know the possibilities before you talk with them.

ATO


Comments

    The limit applies to each individual item; if you purchased four $3000 notebooks for work, they would all be immediately written off, rather than being depreciated over a period of three or four years.

    Care for a citation for that one. (once the ATO website is working again, it's down currently for searches)

    Normally a set of assets must be grouped and the low value write-offs cannot be claimed. I'd provide.

      Linked page is up now (albeit with new address, ATO has undergone a site rebuild) and says: "The small business instant asset write-off threshold has increased from $1,000 to $6,500 allowing small businesses to immediately write-off most new depreciating assets costing less than $6,500.
      This means for example if you bought a $5,900 camera and a $4,500 high resolution printer that are used exclusively for your photography business, as each item cost less than $6,500, you can now immediately write off the cost of both the camera and the printer in the 2012–13 income year."

        That example works because a printer is different to a camera and does not form a set.

        If you bought a $5900 camera at the same time as you bought 3x$500 lenses it would be considered a set and therefore depreciated as normal.

        Your example of 4 laptops is clearly a set under the ATO rules.

        The following is an extract from the "old" limits because I can't get any of the new pages to load. But I'll be happy to provide a further link if I can get one to load.

        The UCA rules provide an immediate deduction for a depreciating asset where the asset satisfies all of the following:
        it cost $300 or less
        you used it mainly for the purpose of producing assessable income that is not income from carrying on a business
        it is not part of a set of assets that you acquired in the income year that cost more than $300
        it is not one of a number of identical or substantially identical items that you acquired in the income year that together cost more than $300.
        Example: substantially identical items
        Jan buys four matching chairs for the dining table in her rental property. Each chair costs $150. Jan cannot claim an immediate deduction for the cost of each individual chair because they are substantially identical and their total cost exceeds $300.

        Last edited 26/06/13 3:44 pm

          Sorry but I disagree. The $300 limit you have quoted is not the 'old' limit. It still applies to individuals or non-business taxpayers claiming depreciation predominantly for home office and rental property items.

          The limit has been increased from $1,000 to $6,500 for 2013 for Small Business Entities (SBE's). There are no rules relating to sets or identical assets for SBE's to gain an immediate deduction that I am aware of. Hence for a SBE, the camera, lenses and laptops could all be claimed in full as long as the cost of each item can be separately identified.

          The main issue is whether a business qualifies as a SBE. There are several criteria a business must first meet. In addition, an SBE must not have withdrawn from applying the SBE concessional depreciation rules in the previous 5 years!

          I would strongly suggest that businesses first talk to their tax adviser before assuming that they will automatically qualify.

    I need to know if i have bought some assets that Television & other furniture can i claim deduction for it if yes how??

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