Appendix 1: Calculations for small business depreciation deductions

Calculation 1: Deduction for certain assets and cost additions (costing less than $20,000)

For an explanation of the terms we use in this section, see Guide to depreciating assets 2024 and Tax time definitions.

Under the instant asset write-off measure, an immediate deduction is available for the cost of certain depreciating assets that:

• you start to use, or have installed ready for use for a taxable purpose between 1 July 2023 and 30 June 2024
• cost less than $20,000 at the end of the income year
• qualify for a deduction under the simplified depreciation rules.

For an asset for which you have claimed an immediate deduction under the simplified depreciation rules in a prior income year, small businesses can also immediately deduct an amount included in the second element (cost addition) of that asset's cost, where the amount is:

• the first deductible amount of second element cost incurred after the end of the income year in which the asset was written off
• less than $20,000
• incurred between 1 July 2023 and 30 June 2024.

Work out the taxable purpose proportion of each of these assets and cost additions. You calculate the deduction as follows:

• Step 1: Multiply each asset's adjustable value and any cost addition amounts by the taxable purpose proportion (%).
• Step 2: Add up these results and write the total at row a in Worksheet 2.

For assets you held before using the simplified depreciation rules, assets that cost $20,000 or more and all other cost additions – see Calculation 2.

Calculation 2: Deductions for the general small business pool

You allocate depreciating assets to the general small business pool that:

• you held prior to using the simplified depreciation rules
• cost $20,000 or more, even if the taxable purpose proportion is less than $20,000.

You can choose not to allocate an asset to your general small business pool if you first used it, or installed it ready for use, for a taxable purpose before 1 July 2001.

To calculate your deductions for the general small business pool, there are 3 parts:

• Calculation 2a – Calculate your opening pool balance
• Calculation 2b: Deduction for existing assets in the general small business pool
• Calculation 2c: Deduction for newly acquired pooled assets and cost additions

Calculation 2a – Calculate your opening pool balance

Calculate your opening pool balance, where:

• 2023–24 the first income year using simplified depreciation rules
• 2023–24 not the first income year using simplified depreciation rules

2023–24 the first income year using simplified depreciation rules

For small business entities that have not previously used the simplified depreciation rules, the opening pool balance is the sum of the taxable purpose proportions of the adjustable values of those depreciating assets that are used, or held for use, just before the start of 2023–24, and that are not excluded from the simplified depreciation rules.

To calculate your deductions for the general small business pool, see Calculation 2b and Calculation 2c.

2023–24 not the first income year using simplified depreciation rules

If 2023–24 is not the first income year in which you are a small business entity using the simplified depreciation rules, the opening balance of your small business pool for the current year is the closing balance from the previous year, adjusted to reflect any change in taxable purpose of pooled assets.

However, as you deducted the entire balance of the small business pool under temporary full expensing in 2022–23, the opening balance of the pool for 2023-24 is $0.

Calculation 2b: Deduction for existing assets in the general small business pool

Before calculating the deductions in calculations 2b and 2c, but after taking into account any additions and disposals (refer to Steps 1-3 in Calculation 5), if the balance of a pool is below $20,000 but greater than zero you can claim an immediate deduction for this amount. Write this deduction against general small business pool assets at row b in Worksheet 2.

If the balance of a pool is over $20,000, calculate your deduction for the general small business pool in 2023–24 as follows:

• Step 1: Multiply the opening pool balance by 30% (pool rate).
• Step 2: Where necessary, make a reasonable apportionment for the general small business pool deduction between primary production and non-primary production activities.
• Step 3: Write the result of your general small business pool deduction at row b in Worksheet 2

You can also work out your depreciation and capital allowance claims by using the Depreciation and capital allowances toolThis link opens in a new window.

Calculation 2c: Deduction for newly acquired pooled assets and cost additions

You calculate your deduction at half the general small business pool rate for:

• depreciating assets, including motor vehicles, that cost more than $20,000 that you first used or installed ready for use for a taxable purpose during 2023–24
• cost addition amounts costing $20,000 or over incurred in 2023–24 for assets already allocated to the general small business pool – for more information see Small business pool calculations.

Calculate your deduction as follows:

• Step 1: Multiply the taxable purpose proportion of the adjustable value of each depreciating asset, first used for a taxable purpose this income year, by 15% (half pool rate).
• Step 2: Multiply the taxable purpose proportion of the cost addition amounts by 15% (half pool rate).
• Step 3: Add amounts from Step 1 and Step 2 and write the calculated amount at row c in Worksheet 2.

Calculation 3: Other depreciating assets

Work out your deduction for the decline in value of all your other depreciating assets that are not calculated using the simplified deprecation rules under Calculations 1 and 2.

For information on how to calculate the decline in value of assets under the UCA rules, see Guide to depreciating assets 2024.

Write your total deduction for other depreciating assets at row d in Worksheet 2.

Don't include at row d in Worksheet 2 depreciating assets that qualify for a deduction under Subdivision 40-F or 40-G of the ITAA 1997, such as:

• water facilities
• fencing assets
• fodder storage assets
• landcare operations.

If you used Subdivisions 40-F or 40-G to calculate your deduction for these depreciating assets, show these deductions at P8 Reconciliation items – label W Landcare operations and deduction for decline in value of water facility, fencing asset and fodder storage asset.

Calculation 4: Disposal of depreciating assets

If you used the simplified depreciation rules and you've sold or ceased to use an asset in 2023–24, you may need to reduce your pool balance by the asset's taxable purpose proportion of the termination value or include an amount in your assessable income.

• Calculation 4a Assets immediately deducted under the simplified depreciation rules
• Calculation 4b Assets allocated to the general small business pool
• Calculation 4c Other depreciating assets

Calculation 4a Assets immediately deducted under the simplified depreciation rules

You may need to include an amount in your assessable income to allow for any excess between what you receive for the asset over what you've claimed as a depreciation deduction, if the asset is:

• a depreciating asset (costing less than the relevant instant asset write-off threshold) for which you have claimed an immediate deduction in Calculation 1 this year, or
• a depreciating asset for which you have claimed an immediate deduction in previous income years under the simplified depreciation rules
• to calculate the assessable amount, multiply the termination value by the taxable purpose proportion of the asset at the time it was written off. Include this value in P8 Reconciliation items – label X Income reconciliation adjustments.

Calculation 4b Assets allocated to the general small business pool

Where you dispose of depreciating assets that have been allocated to the general small business pool, you deduct the taxable purpose proportion of the termination value from the closing pool balance in Step 3 of Calculation 5.

Calculation 4c Other depreciating assets

Where you dispose of assets that were not depreciated using the simplified depreciation rules, a balancing adjustment event may occur. You will need to calculate a balancing adjustment amount to include in your assessable income or to claim as a deduction. For more information see, Guide to depreciating assets 2024 – What happens if you no longer hold or use a depreciating asset?.

You can also work out your depreciation and capital allowance claims by using the Depreciation and capital allowances toolThis link opens in a new window.

Balancing adjustment amounts are included in P8 Reconciliation items. For more information, see:

• What are income reconciliation adjustments?
• What are expense reconciliation adjustments?

Calculation 5: Closing pool balance

Calculate your closing pool balance at the end of the year as follows:

• Step 1: Add the taxable purpose proportion of the adjustable value of assets that were first used, or installed ready for use, for a taxable purpose during 2023–24 (see Calculation 2c) to your opening pool balance (from Calculation 2a)
• Step 2: Add the taxable purpose proportion of any cost addition amounts for assets that were already in the pool at the beginning of the income year (from Calculation 2c)
• Step 3: Subtract the taxable purpose proportion of the termination value of any pooled assets disposed of during the income year (from Calculation 4b).
  
  If after completing Step 3 your pool balance is less than $20,000 but greater than zero, you can claim an immediate deduction for this amount. Enter this deduction against general small business pool assets at row b in Worksheet 2. The pool's closing balance for 2023–24 will be zero after claiming the immediate deduction.
  
  If the value of the small business spool is $20,000 or more after completing Step 3, continue calculations as per the steps below.
• Step 4: Subtract the general small business pool deduction (from Calculation 2b)
• Step 5: Subtract the deduction for newly acquired pooled assets (see Calculation 2c)
• Step 6: Subtract the deduction for any cost addition amounts for pooled assets (see Calculation 2c)

If the closing pool balance is less than zero, include this amount in your assessable income in P8 Reconciliation items – label X. If the total amount in this label is a loss, print code L in the box to the right of the amount.

The closing pool balance for this year becomes the opening pool balance for 2024–25, after any adjustments to reflect the changed business use of a pooled asset.

The closing pool balance is needed to work out your general small business pool deduction for next year. Don't write the closing pool balance in the tax return.

Worksheet 2: Depreciation deductions for small business entities using simplified depreciation

Worksheet 2 – Depreciation deductions (small business entities using simplified depreciation only)

Row	Calculation elements	Primary production	Non-primary production	Total
a	Deduction for certain assets (costing less than $20,000 instant asset write-off threshold)	$	$	$
b	Deduction for general small business pool (30%)	$	$	$
c	Deduction for general small business pool for new assets only (15%)	$	$	$
d	Other depreciating assets	$	$	$
e	Total depreciation expenses: add the amounts at rows a, b, c and d	$	$	$

Continue to: Appendix 2: Small business bonus deductions

Return to: Instructions to complete the BPI schedule 2024