Depreciation made simple for small business
Depreciation has been made simpler for small business in the 2012/2013 income year. There are three main changes which may impact the timing of asset purchases.
Understanding the Concept of Depreciation
Firstly, there is an increase to the instant asset write-off threshold. You can now claim an outright deduction (also known as a write-off) for most depreciating assets purchased that cost less than $6,500 each. This has increased from $1,000.
For example, on 1 May 2013 you buy a new laptop for your business costing $1,500 and a high resolution printer for $5,000. Both the laptop and printer are used entirely for business and are depreciating assets. Each asset is less than $6,500, so you are able to claim a full deduction of $1,500 for the laptop and $5,000 for the printer for the 2013 financial year.
The second change in depreciation is in regard to the accelerated deduction in motor vehicles. From the 2012/2013 year, you can claim an immediate $5,000 deduction if you purchase a motor vehicle to use in your business. The remainder of the cost can be deducted through the general business pool at 15% for the first year and 30% for later years.
Pooling for depreciation has also been simplified for small business. From 2012-2013, most depreciating assets that cost less than $6,500 or more (regardless of their effective life) can be pooled under the simplified depreciation rules and deducted at a single rate of 30%. However, newly acquired assets (like a motor vehicle) are deducted at 15% in the first year.
If you had a long life pool (which no longer exists), its closing balance is rolled over to form part of the opening balance of the general pool for the 2012/2013 income year (to be depreciated at a rate of 30% instead of 5 %.)