The details of the government’s repeal of the Minerals Resource Rent Tax (MRRT) make it clear that some small business tax concessions put in place by the former government are to be wound back. Repeal of the small business capital allowance concessions will apply from January 1, 2014.
Businesses thinking of acquiring a depreciating asset costing less than $6,500 or a motor vehicle had to do so before January 1 to take advantage of these concessions.
Until December 31, 2013, the capital allowance concessions available to small businesses are as follows:
– an immediate tax deduction available for business plant and equipment purchased with a cost of less than $6,500, and
– a small business that purchases a motor vehicle for business use is entitled to an immediate deduction of the first $5,000 value of the motor vehicle plus 15% of any additional value.
– The remaining value is allocated to the small business general pool with a rate of 30% to be claimed in subsequent income years. These concessions are only available to businesses that have a small business pool.
After January 1, legislation amendment is:
– reduce the $6,500 threshold to the previous amount of $1,000 so that assets exceeding the $1,000 threshold will instead be allocated to a special small business general pool for depreciation claims, and
– repeal the special rule for motor vehicles so they will be depreciated by small businesses in the same manner as other depreciable assets.
Keep in mind that the mere execution of a contract to acquire an item would not be deemed sufficient under taxation law as a start date. They must be “first used” or “installed ready for use” before January 1, 2014, to be subject to the concessional treatment.
I’m not suggesting you rush out and purchase capital items for the heck of it, but if you are in need of upgraded computer systems or have been considering replacing your old tools or office furnishings, now would be the time to do it.
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