How the $20,000 instant asset write off works with the general asset pool for SBE

If I have a general pool and the opening balance is $18,000 as at 1/7/14. I then I add an assets worth $5,000 (assume 100% business) purchased during the year.  My depreciation deduction normally was $6,150 (30% on $18,000 + 15% on $5,000) and therefore the closing balance of the general pool at 30 June 2015 was previously $16,850.  Can I write-off the total balance of the pool and therefore claim a depreciation expense of $23,000 ($6,150 depreciation  + $16,850 written down value at the EOY) because at 30 June 2015 my closing pool balance was less than $20,000?

Answer - is Yes 🙂

The rules do not actually look at the closing balance of the pool.

The rules dealing with this are contained in section 328-210 ITAA 1997 and section 328-180 Income Tax (Transitional Provisions) Act 1997.  What the rules say is that you work through the following formula first:

  • Start with the opening balance of the pool; $18,000
  • We don't need to Add the business use percentage of any assets added to the pool for the year under $20,000; $5,000 (as this is below the $20,000)
  • Less the business use percentage of any assets disposed of during the year. In this case $0
  • The result is $18,000 + ($5,000 not include s this is claimed under the $20,000 instant asset write off) = $18,000
  • You can claim $18,000 + $5,000 = $23,000 in your tax return

If the result of the formula is less than $20,000 on the 30th June 2015 or 2016, then you claim a deduction for that amount and the pool balance becomes nil.

You will notice that the formula does not take into account the current year depreciation deductions.

If the balance of the pool prior to subtracting the current year depreciation amounts would be over $20,000, you are not be able to write-off the pool balance in the 2015 & 2016 income year.

In addition the qualification for a small business turnover has been increased from $2,000,000 to $10,000,000 p.a.

Revised 2nd June 2016 -

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