| Changes in Depreciation |
| Changes in Depreciation |
Business with annual turnover greater than $1million will need to be aware of the new capital allowance/depreciation legislation. While the legislation came into effect from 23rd September 1999, it has the most impact when preparing financial statements and tax returns for the year-end 30th June 2000.
The new legislation currently only applies to businesses with turnover greater than $1million annually.
The key aspects of the legislation are as follows:
Removal of balancing charge offset. That is, businesses used to be able to defer profits from the sale of assets by applying the profit against the purchase price of the new asset thereby deferring the profit, but reducing the value of the new asset. This can no longer be done. The profit on
the asset disposed of will be assessable when sold, and any new assets will be depreciated at their purchase price.
Immediate write off of assets under $300 has been removed. Businesses will no longer be able to take a 100% write off for assets they purchase less than $300. A low value pool has replaced this. Assets purchased with a value less than $1,000 will be placed into the pool and depreciated at 18.75% for the first year they are purchased. At the start of the new financial year, they will be transferred to a new pool and depreciated at 37.5%.
Accelerated depreciation has been removed. In lieu of this, businesses will be able to determine the effective life of assets or alternatively they will be able to use a new effective life table to be issued by the ATO. The ATO are yet to issue the revised depreciation tables, but have indicated these will be available in the near future.
Importantly, the above measures are only applicable to businesses with annual turnover greater than $1 million.
Businesses with annual turnover less than $1 million will potentially be facing these measures from 1st July 2001.
These changes are very important and all businesses acquiring assets should be familiar with these provisions.
20th-April-2001 |
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