It was announced in the last Federal Budget in May 2012 that there were going to be a few changes to the small business depreciation rules. The ATO has updated their website to provide information about these changes which will apply from 01/07/2012.
The immediate write off threshold for asset purchases has increased from $1,000 to $6,500.
For motor vehicles only, and greater than $6,500 cost, you can get an additional $5,000 upfront depreciation allowance in the first year i.e.$5,000 accelerated depreciation bonus + normal depreciation.
As the small business depreciation rules do not refer to specific buy dates, but rather the tax year, you can plan for capital acquisitions for later in the tax year (April – June) knowing that you still get a full year depreciation claim.
Any assets < $6,500 can immediately be written off ($6,500 x 30% tax rate = saving of $1,950 worth of tax).
Any motor vehicles > $6,500 will get the $5,000 up front deduction ($1,500 tax saving at 30%) + can claim the normal 15% Yr1 depreciation rate – thus a 30K motor vehicle will get you a deduction of $9,500 in Yr1 and reduce tax by $2,850.
Remember though, whilst these incentives are very welcome, never buy a car just for a tax deduction. When you buy a new vehicle there is always still a net cost to you after tax. You either want the car because it looks nice or you need the car to do the business, don’t fool yourself into thinking you ‘need the car to save you tax’.
For more information please do not hesitate to contact us at 3D Accounting.
NB: A small business entity refers to businesses (and affiliates) with aggregated/group turnover of less than $2M.