The Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Bill 2017 passed all stages without amendment and effectively await Royal Assent, after having been passed by the Senate 15.6.2017.
The Bill amends the $20,000 accelerated depreciation rules, for 12 months to 30 June 2018 (s328-180 ITAA 1997 & s328-180 Transitional Act).
- Section 328-180 provides a 100% write-off for costs under $1,000 but this was increased to $20,000 via s328-180 of the Transitional Act. This increased limit ran from budget time in 2015 and had been due to expire on 30 June 2017.
- This accelerated depreciation is for for small business entities, which had been business entities with a turnover under $2 million, but from 1 July 2016, this has been increased to $10 million (s328-110).
- The extended period applies to immediate write-off of the 1st element of cost of a depreciating asset, if it is under $20,000 (s328-180(1) & s328(180(4) of the Transition Act). The 1st element of the cost is, in essence, the cost of its acquisition (s40-180(1)).
- The extended period also applies to an immediate write-off of the 2nd element of the cost of a depreciating asset, if the 2nd element of the cost is under $20,000 and the 1st element of the cost of the asset was 100% written off in an earlier year (s328-180(2) & s328-180(5) of the Transition Act). The 2nd element of the cost of a depreciating asset includes the cost of improving or transporting the asset (s40-190).
- There are matching provisions requiring the cost of depreciating assets be added to the ‘pool’, for amortised deductions, only if the 1st element of the cost, or the 2nd element of the cost, is over $20,000, in any one year (s328-180(3) & s328-180(5) of the Transition Act). The period for this higher threshold has been similarly increased.
- The extended period also applies to the immediate write-off of closing balances of the small business depreciation pool, where that balance is less than $20,000 (s328-210(1) & s328-180(6) of the Transition Act).
- The extended period also affects the so called 5 year ‘lock out rule’. Section 328-175(10) requires a taxpayer who has opted out of the small business depreciation regime, to wait 5 years before it can elect to apply it again. But this was amended to allow all small business taxpayers access to the increased $20,000 accelerated depreciation (s328-180(2) Transitional Act). This created what the Transition Act called ‘increased access years’ (in essence: the 2015, 2016 and 2017 years). There will be now be another: 2018 ‘increased access year’.
[APH – Bills Digest; Bill; EM; FJM; LTN 111, 15/6/17]