The Treasury Laws Amendment (Accelerated Depreciation For Small Business Entities) Act 2017 extends the period during which small business entities (SBEs) can access accelerated depreciation. The extension is for 12 months, ending on 30 June 2018. 

SBEs will be able to can claim an immediate deduction for depreciating assets that cost less than $20,000, provided the asset is first acquired at or after 12 May 2015, and first used or installed ready for use on or before 30 June 2018. Depreciating assets that do not meet these timing requirements will continue to be subject to the $1,000 threshold.

SBEs will be able to claim an immediate deduction for depreciating assets that cost less than $1,000 if the asset is first used or installed ready for use on or after 1 July 2018.

Second element of cost of depreciating assets

SBEs will be able to claim a deduction for an amount included in the second element of the cost of depreciating assets that are first used or installed ready for use in a previous income year. The total amount of the cost must be less than $20,000 and the cost must be incurred on or after on 12 May 2015 and on or before 30 June 2018. Costs that are incurred outside of these times will continue to be subject to the $1,000 threshold.

SBEs will be able to claim a deduction for an amount included in the second element of the cost of depreciating assets that are first used or installed ready for use in a previous income year, where the amount is less than $1,000 and the cost is incurred on or after 1 July 2018.

Extension of deduction for low pool values

From 12 May 2015, assets that cost $20,000 or more, and costs of $20,000 or more relating to depreciating assets, can be allocated to an SBE's general pool and deducted at a specified rate for the depletion of the pool. This does not change.

Assets and costs allocated to a general pool are deducted at a rate of 15% in the year they are allocated and a rate of 30% in subsequent income years.

If the balance of an SBE's general pool is less than $20,000 at the end of an income year, it can claim a deduction for the entire balance of the pool. The income year must end on or before 30 June 2018 (rather than the previously stipulated 30 June 2017).

If the balance of an SBE's general pool is less than $1,000 at the end of an income year that ends after 30 June 2018 (instead of the previously stipulated 30 June 2017), it can claim a deduction for the entire balance of the pool.

Deferral of five-year "lock-out" rule

The increased threshold that applies until 30 June 2018 will apply to all SBEs, including those subject to the five-year lock-out rule in that period due to the entity previously opting out of the SBE capital allowance provisions.

For the purposes of applying the lock-out rule to an income year after 30 June 2018, only the choice made in the last income year ending on or before 30 June 2018 will be relevant.