The Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Bill 2018 has now passed through both houses of Parliament without amendment. This uncontroversial and widely supported Bill was originally introduced on 24 May 2018, so it is unusual that the process has taken almost four months.
The Bill amends the Income Tax Assessment Act 1997 and the Income Tax (Transitional Provisions) Act 1997 to extend the period during which small business entities can access expanded accelerated depreciation rules for assets costing less than $20,000 by another 12 months, to 30 June 2019 (the threshold amount was due to revert to $1,000 on 1 July 2018).
Among other things:
- Small business entities will be able to claim an immediate deduction for depreciating assets that cost less than $20,000, provided the asset is first acquired at or after 7.30 pm (ACT legal time) on 12 May 2015, and first used or installed ready for use on or before 30 June 2019. Depreciating assets that do not meet these timing requirements continue to be subject to the $1,000 threshold.
- Small business entities 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 2019.
- Further, small business entities 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 at or after 7.30 pm (ACT legal time) on 12 May 2015, and on or before 30 June 2019. Costs that are incurred outside of these times continue to be subject to the $1,000 threshold.
Currently, assets that cost $20,000 or more, and costs of $20,000 or more relating to depreciating assets, can be allocated to a small business entity's general small business pool and deducted at a specified rate for the depletion of the pool. This does not change.
The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, welcomed the passing of the Bill but said, "We will still continue to push for embedding the instant asset write-off in legislation and raising the threshold to at least $100,000". She said that for capital-intensive businesses the $20,000 threshold is too low; for example, if you're a farmer and you want to buy an asset like a tractor, "you're not going to get one for anywhere near the $20,000 threshold".
Ms Carnell said small businesses and family enterprises need to remember that this is a tax deduction, not a rebate – so they need to make a profit to be eligible to claim the benefit.