Reduction in Small Business Depreciation

Some small business accelerated depreciation rules will be removed from 1 January 2014.

Since 1 July 2012 eligible small business taxpayers have been able to claim an immediate deduction for assets costing less than $6,500. This will revert to a threshold of $1,000 for assets that are first installed and ready for use on or after 1 January 2014.

If the value of a small business entity’s low-value pool is less than $6,500 at the end of the income tax year, the small business can write off the balance at year end. This will also revert to a balance threshold of $1,000 for the 30 June 2015 year.

A small business entity can also currently deduct the first $5,000 of a motor vehicle, plus 15% of the remaining cost in the income year it is first ready for use. This additional $5,000 deduction in the first year, will no longer be available for motor vehicles first ready for use on or after 1 January 2014.

Eligible small business taxpayers should consider bringing forward capital expenditure and ensuring new assets are installed and ready for use on or before 31 December 2013 to ensure depreciation deductions are maximised in the 2014 tax year.