Simplified depreciation rules for small business

Eligible business

You can choose to use the simplified depreciation rules if you have a small business with an aggregated turnover of less than:

  • $10 million from 1 July 2016 onwards
  • $2 million for previous income years.

Annual turnover is all ordinary income you earned in the ordinary course of running a business for the income year.

Aggregated turnover is generally your annual turnover plus the annual turnover of any business:

  • connected with you
  • that is your affiliate.
    Simplified depreciation rules for small business include:

Simplified depreciation rules for small business include:

  • an instant asset write-off for assets that cost less than the relevant threshold (which is supplemented with the temporary full expensing from 7.30pm AEDT on 6 October 2020 to 30 June 2023)
  • a general small business pool, which has simplified calculations to work out the depreciation deduction.

Instant asset write-off

Under instant asset write-off, eligible businesses:

  • can immediately write off the cost of each asset that costs less than the relevant threshold amount
  • claim a tax deduction for the business portion of the cost in the year the asset is first used or installed ready for use.

Small Business pool

For your income years ending before 6 October 2020, you:

  • pool the business portion of most higher cost assets (those with a cost equal to or more than the relevant instant asset write-off threshold) and claim

    • a 15% deduction in the year you start to use them or have them installed ready for use
    • a 30% deduction each year after the first year
  • deduct the balance of the small business pool at the end of the income year if the balance at that time (before applying the depreciation deductions) is less than the instant asset write-off threshold.

See ATO’s full instruction for Simpler depreciation for small business