Deduction rules for small businesses


August 12, 2019 8:54 am Published by

Spending on capital assets usually cannot be deducted immediately. Instead, small businesses claim the costs over time in accordance with the asset’s depreciation. There are many different processes that businesses can employ to make claims on their assets. For small businesses with lower-cost assets, methods such as simplified depreciation or the threshold rule can help to make more effective claims.

Simplified depreciation:
Under simplified depreciation rules, business owners can immediately deduct the business portion of each depreciating asset that was first used or installed ready for use up to:

  • $30,000 from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020.
  • $25,000 from 20 January 2019 until 7.30pm (AEDT) on 2 April 2019.
  • $20,000 before 29 January 2019.

Owners can also pool the business portion of most other depreciating assets that cost more than the relevant threshold in a small business asset pool. Then they can claim a 15% deduction in the first year, regardless of whether they were purchased/acquired during the year, and then a 30% deduction each year after.

The threshold rule:
The threshold rule allows owners to claim an immediate deduction for most expenditure of $100 or less, including any GST, to buy physical assets for the business. The rule is designed to help save time as purchases don’t have to be specified if they are of revenue or capital nature. Some examples of items costing $100 or less that fall within the threshold rule are:

  • Office equipment – staplers, pens, books, etc.
  • Catering items – cutlery, glasses, table linen, etc.
  • Tradesperson small hand tools – pliers, screwdrivers, hammers, etc.

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