Business deductions – Depreciation: Tax basics for small business

Business deductions – Depreciation: Tax basics for small business


You may be able to claim a deduction for the
decline in value of your depreciating A depreciating asset is an asset that has
a limited effective life and can reasonably be expected to decline in value over the time
it is used. Things like computers, electrical tools, furniture, carpets and curtains, and
motor vehicles. You can claim a deduction for part of the
value of these assets in each year of their effective life. The ATO publishes a complete
list of assets and their effective life which you can use, or you can assess the effective
life of the depreciating assets yourself. You can only claim the depreciation on an
asset to the extent it’s used in your business – so the amount you can claim will be less
if you used the asset partly for business purposes.
The amount you can claim will also be reduced if you only owned the asset for part of a
year. If you owned the asset for some time before you started business, you need to work
out that asset’s reduced value as of when you start using it in your business.
If you operate a small business you can choose to use a simpler and more generous
of depreciating assets. Simpler depreciation rules mean you can immediately
write off most depreciating assets under a certain amount, pool other depreciating assets
in the ‘general small business pool’ and claim a deduction for them at the pool rate,
and claim a deduction for most assets you have newly purchased or acquired at half the
pool rate in the first year, no matter when you acquired them during the year.
For more information and formulas go to the ATO’s website.

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