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Small Business Concession Case Studies
Understanding changes effective from 1 January 2014


As part of the changes flagged in the 2013 election, the Federal Government has recently acted to reduce or remove some small business concessions. The changes are effective from 1 January 2014, meaning they may affect 2013-14 business income tax returns.

Generally, businesses qualify for the small business entity concessions when they are a 'small business entity' for the year in question (although some of the concessions have additional conditions). You are a small business if you carry on a business and your business turnover (aggregated turnover) is less than $2 million. 

Under the recent changes, the instant asset write-off threshold has been reduced from $6,500 to $1,000. Assets costing less than $6,500 that were acquired and installed ready for use by 31 December 2013 can still be immediately written-off. Assets acquired on or after 1 January 2014 can only be immediately written-off if they cost less than $1,000. The accelerated initial deduction for motor vehicles has been removed.

Small businesses can still claim an accelerated deduction for motor vehicles costing $6,500 or more, as long as they were acquired and available for use by 31 December 2013.

 

Case Studies for the 2013-2014 Financial Year


Instant asset write-off

By 31 December 2013

On or after 1 January 2014

Steve bought a commercial coffee machine for $6,499.99 to go in his new cafe. He installed it on 31 December 2013, and uses it solely for business purposes.

From 1 July – 31 December 2013, small businesses can claim an instant asset write-off for most assets that cost less than $6,500. The asset must be acquired and installed ready for use before 1 January 2014.

Because Steve bought and installed the coffee machine before 1 January 2014, and because it cost less than $6,500, he can claim the instant asset write-off.

Delilah bought a computer for $3,000 on 31 December 2013, but installed it ready for use on 1 January 2014. It's used for her editing business 100% of the time.

From 1 January 2014 onwards, small businesses can claim an instant asset write-off for most assets that cost less than $1,000.

Even though Delilah bought the computer on 31 December 2013, she only installed it ready for use on 1 January 2014. This means the lower instant asset write-off rules apply. Because the computer cost $1,000 or more, Delilah can't claim the instant asset write-off.


General small business pool

By 31 December 2013

On or after 1 January 2014

Wilbur operates his own Dental Centre. To entertain his clients, he buys and installs a new TV in the ceiling above the dental chair. The TV cost $6,500, and he installed it on 23 November 2013.

From 1 July – 31 December 2013, small businesses can claim an instant write-off for assets costing less than $6,500. Assets costing $6,500 or more should be depreciated through the general small business pool.

Wilbur must allocate the cost of the TV to the general small business pool. He can claim a deduction of 15% in the first year of owning this asset and 30% in following years.

Ying owns a restaurant called The Little Pork Chop. In March 2014 Ying bought two new sets of tables and chairs, which cost $1050 each set.

From 1 January 2014 onwards, small businesses can only claim an instant write-off on assets costing less than $1,000. Assets costing $1,000 or more should be depreciated through the general small business pool.

Ying must allocate the cost of her new tables and chairs to the general small business pool. She can claim a deduction of 15% in the first year of owning the assets, and 30% of the remaining cost in following years.


Accelerated initial deduction for motor vehicles 

By 31 December 2013

On or after 1 January 2014

Andre owns a furniture restoration business that's growing. In October 2013 Andre bought and began using a new sedan for the business. It cost $40,000 and is used entirely for work.

From 1 July – 31 December 2013, accelerated motor vehicle deductions apply. Eligible small businesses can receive an accelerated deduction of $5,000 for motor vehicles costing more than $6,500 and also claim a 15% deduction through the general small business pool. The remaining cost is deducted at a rate of 30% in following years.

Because Andre bought and began using the car by 31 December 2013, Andre can claim an accelerated motor vehicle deduction.

Keenan bought a new car for his chauffeur business in February 2014.

From 1 January 2014 onwards, there are no accelerated motor vehicle deductions.

This means the full cost of the car must be allocated to Keenan's general small business pool. He can claim a deduction at 15% of the cost in the first year and 30% of the remaining cost in each year after that.


If you have any questions, you should contact your GCC advisor on 02 9899 3044.

   

 


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