A specialist quantity surveyor, such as BMT Tax Depreciation, ensures all small business owners maximise their cash flow with depreciation deductions.
With a number of incentives currently on offer like the instant asset write-off threshold increase, Backing Business Investment (BBI) incentive and general small business pool, piecing together who is eligible for what can be confusing.
The general small business pool is an incentive in place that allows many business owners to accelerate depreciation deductions for several years.
What is the general small business pool and which businesses are eligible?
The general small business pool allows business owners to claim depreciation on plant and equipment items at an accelerated rate. The pool is simplified to allow them to claim back more sooner.
A small business with an aggregated turnover of less than $10 million can place qualifying assets that cost equal to or above the current instant asset write-off threshold into a general small business pool. This allows the small business to claim depreciation on qualifying assets at a rate of 15 per cent in the first year, and 30 per cent each following year.
Deducting the general small business pool total balance
A small business can deduct the entire balance of the pool if the closing value, before applying the depreciation deductions, is less than the current instant asset write-off threshold. Let’s see how this works in practice.
|In practice: General small business pool total deduction
Kate owns a restaurant and has earned a total aggregated turnover of $5 million. She has a number of assets allocated to her general small business pool including beer dispensing systems, bar refrigerators, freestanding restaurant furniture, kitchen exhaust fans and carpets.At the end of the 2019-20 financial year, the total balance of Kate’s general small business pool, before applying the depreciation deductions, came to $65,000. Given that the current instant asset write-off threshold for the financial year was $150,000, Kate can deduct the entire balance of the pool.
General small business pool and the Backing Business Investment incentive
The Backing Business Investment (BBI) Incentive is currently in place until 30 June 2021. The incentive allows many businesses to accelerate depreciation deductions even further for new plant and equipment assets.
The BBI incentive allows small businesses using the simplified depreciation rules to claim 57.5 per cent of the asset’s cost in the first year and then add it to the general small business pool in following years.
|In practice: BBI incentive and the general small business pool
Jim owns a construction business that was founded in 2017. Since opening, his business has earned a total aggregated turnover of $6 million.In May 2020 Jim purchased a brand-new hydraulic excavator for his business use. The total cost of the excavator came to $155,000. At the time of acquisition, the instant asset write-off threshold was $150,000. Therefore, Jim couldn’t instantly write-off the new excavator and was instead eligible for the BBI incentive.Under the BBI incentive, Jim was able to deduct 57.5 per cent of the excavator for the 2019-2020 financial year, leading to a deduction of $89,125. For following years, the excavator will be placed in general small business pool and depreciated at a rate of 30 per cent.
Apportioned assets and the general small business pool
Some businesses may use assets for both personal and business use, for example a vehicle.
In these instances, determining whether the instant asset write-off or general small business pool applies depends on the portion the asset is used for business purposes and private use. If the value of the business-use portion of the asset doesn’t fall within the relevant thresholds, it can’t be claimed as a write-off or placed in the pool.
BMT Tax Depreciation are the commercial specialists
For over 20 years, BMT Tax Depreciation have been trusted by business owners across all industries.
BMT ensure that every instant write-off, general small business pool and depreciation rule is applied in their comprehensive schedules. This ensures all claims are maximised and Australian Taxation Office compliance is maintained.
To learn more about claiming depreciation for your small business, Request a Quote or contact BMT on 1300 728 726.