Instant Asset Write Off

The Government will simplify tax for small businesses and boost their cash flow, by allowing small businesses to instantly write off each and every new business asset costing less than $6,500 (for as many assets as they purchase) from 2012-13.

This means that a business that purchases four items of equipment worth $6,000 each will be able to get a deduction of $24,000 in the first year (rather than $3,600). As a result, this small business company will pay around $6,120 less tax in the next tax return. If they operated as a sole trader they may be able to get an even bigger tax saving.

In addition, the Government will simplify tax for small businesses, by replacing the two depreciation pools that currently exist, with a single depreciation pool. Assets costing more than $6,500, can be depreciated in a single pool from 2012-13 (15 per cent in the year they are purchased, 30 per cent in each subsequent year).

IMMEDIATE DEDUCTION FOR THE FIRST $5,000 OF THE COST OF A MOTOR VEHICLE BY SMALL BUSINESSES

This means that small businesses will be able to immediately deduct the first $5,000 of a new or used motor vehicle, purchased from 1 July this year.

Moreover, the remainder of the cost of the vehicle will also be depreciated under a new single pool depreciation rate of 15 per cent in the initial year of purchase and 30 per cent in subsequent years to the extent that the vehicle was used for a taxable purpose. This concession does not apply to tractors, graders, road rollers, combine harvesters, trailers and earthmoving vehicles.

These reforms will make the tax system simpler for small businesses, whether they are run by sole traders, partnerships, trusts or through a company.