Small business entity simplified depreciation
This section is only for small business entities using the simplified depreciation rules.
Small business entities can claim an immediate deduction for assets they start to use, or have installed ready for use, for a taxable purpose, provided each depreciable asset costs less than $20,000. This temporarily replaces the instant asset write-off threshold of $1,000.
This measure applies to expenditure incurred from 7.30pm (AEST) 12 May 2015 until 30 June 2018.
To complete these fields, use the:
- Depreciation and capital allowances tool, or
- amounts you calculated for small business entity depreciation deductions in worksheet 2 and follow the steps:
- At Small business entity simplified depreciation – Deduction for certain assets enter the amount from row a in the worksheet.
- At Small business entity simplified depreciation – Deduction for general small business pool enter the total of the amounts from rows b and c in the worksheet.
Enter the depreciation deductions, not the pool balances.
Trade debtors
This is the total amount owing to the business at the end of the year for goods and services provided during the income year (that is, current trade and other debtors).
Work out the total amount owing from trade and other debtors. If you have more than one business, add up all trade and other debtor amounts.
Trade creditors
This is the total amount owed by the business at the end of the year for goods and services received during the income year (that is, current trade and other creditors).
Work out the total amount owing to trade and other creditors. If you have more than one business, add up all trade and other creditor amounts.
Total salary and wage expenses
Salary, wages and other labour costs actually paid or payable to persons employed in your business (excluding those forming part of capital expenditure or paid for private domestic assistance) are usually deductible. However, you cannot be an employee of your business. Payments to you of salary are not allowable deductions in calculating your income or loss; treat these payments as an allocation of profits.
Include any salary and wage component of Cost of sales, such as allowances, bonuses, casual labour, retainers and commissions paid to people who received a retainer, and workers compensation paid through the payroll.
Also include direct and indirect labour, holiday pay, locums, long service leave, lump sum payments, other employee benefits, overtime, payments under an incentive or profit-sharing scheme, retiring allowances and sick pay. Include any salary or wages paid to relatives and other related entities both here and at Payments to associated persons. Exclude agency fees, contract payments, sub-contract payments, service fees, superannuation, management fees and consultant fees.
Select from the drop-down list the letter that matches the description of the expense component where the salary and wage expenses have been wholly or predominantly reported.
Payments to associated persons
These are amounts, including salary, wages, commissions or allowances, paid to your relatives. These also include superannuation contributions paid for the benefit of your relatives.
You must also include amounts of salary or wages paid to your relatives and a partnership in which your relatives are partners at Total salary and wage expenses.
You need to keep the following records:
- full name of relatives or related partnerships
- age, if under 18 years old
- relationship
- nature of duties performed
- hours worked
- total remuneration
- salary or wages claimed as deductions
- other amounts paid, for example, retiring gratuities, bonuses and commissions.
Excessive or unreasonable payments to your relatives, or a partnership in which your relatives are partners, may not be deductible. The PSI rules (see Personal services income (PSI)) also limit deductions for payments to associates.
Intangible depreciating assets first deducted
Small business entities using the simplified depreciation rules do not complete this field.
The following intangible assets are regarded as depreciating assets (as long as they are not trading stock):
- certain items of intellectual property, such as patents, registered designs, copyrights and certain types of licences
- computer software (or a right to use computer software) that you acquire, develop or have someone else develop for your use for the purposes for which it is designed (in-house software)
- mining, quarrying or prospecting rights and information
- certain indefeasible rights to use a telecommunications cable system
- certain telecommunications site access rights
- spectrum licences
- datacasting transmitter licences.
A depreciating asset that you hold starts to decline in value from the time you use it or install it ready for use for any purpose, including a private purpose. However, you can only claim a deduction for the decline in value to the extent that you use the asset for a taxable purpose, such as for producing assessable income.
You need to show the cost of all intangible depreciating assets for which you are claiming a business deduction for decline in value for the first time. If you have allocated any intangible depreciating assets with a cost of less than $1,000 to a low-value pool for the income year, you also need to include the cost of those assets here. Do not reduce the cost for estimated non-taxable use.
Expenditure on in-house software that you allocated to a software development pool is not shown here.
See also Guide to depreciating assets.
Other depreciating assets first deducted
Small business entities using the simplified depreciation rules do not complete this field.
A depreciating asset that you hold starts to decline in value from the time you use it or install it ready for use for any purpose, including a private purpose. However, you can claim a deduction for the decline in value only to the extent you use the asset for a taxable purpose, such as for producing assessable income.
You need to include the cost of all depreciating assets (other than intangible depreciating assets) for which you are claiming a business deduction for the decline in value for the first time.
If you have allocated any depreciating assets with a cost of less than $1,000 to a low-value pool for the income year, you also need to include the cost of those assets here. Do not reduce the cost for estimated non-taxable use.
To calculate the decline in value of these assets use the Depreciation and capital allowances tool.
See also Guide to depreciating assets.
Termination value of intangible depreciating assets
Small business entities using the simplified depreciation rules do not complete this field.
Do not show at this field any consideration you received during the income year in relation to in-house software for which you have allocated expenditure to a software development pool.
Include the termination values for intangible depreciating assets (including intangible assets allocated to a low-value pool) that you stopped holding or using during the year (for example, assets you sold, or that were lost or destroyed).
Generally, the termination value is the amount you received or are deemed to have received for the asset that you stopped holding or using. It includes the market value of any non-cash benefits, such as goods and services, you received for the asset.
Include amounts you received or are deemed to have received for all intangible depreciating assets that you stopped holding or using in your business, other than:
- assets allocated in a prior year to the general small business pool or the formerly available long-life small business pool
- low-cost assets for which an immediate deduction has been allowed under the simplified depreciation rules
- in-house software for which you allocated expenditure to a software development pool.
See also:
Termination value of other depreciating assets
Small business entities using the simplified depreciation rules do not complete this field.
You include the termination values for other depreciating assets (including assets allocated to a low-value pool) that you stopped holding or using during 2017–18 (for example, assets you sold, or that were lost or destroyed).
Generally, the termination value is the amount you received or are deemed to have received for the asset that you stopped holding or using. It includes the market value of any non-cash benefits, such as goods and services, you received for the asset.
Include amounts you received or are deemed to have received for all depreciating assets that you stopped holding or using in your business other than:
- intangible depreciating assets
- assets allocated in a prior year to the general small business pool or the formerly available long-life small business pool
- low-cost assets for which an immediate deduction has been allowed under the simplified depreciation rules
- buildings or structures for which a deduction is available under the capital works provisions
- assets falling within the provisions relating to investments in Australian films.
See also:
Trading stock election
If you have valued trading stock on hand at the end of 2017–18 at an amount that is less than the lowest amount available using one of the valuation methods at Closing stock, you must notify the Commissioner.
If you must notify the Commissioner about your trading stock election, select Yes.