Depreciation Deduction Allowed For Certain Equipment

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A recent case before the AAT has highlighted the need for businesses to maintain appropriate records of plant and equipment used in business.

The taxpayer, who was a partner of a box manufacturing business, was partially successful before the AAT in relation to claims for depreciation for certain items of plant and equipment used in the business. The AAT found that there was sufficient evidence that some items of plant and equipment were used in the business for the purpose of deriving assessable income. However, the AAT found it was not possible to allow the depreciation claimed for a number of other items. A key problem noted by the AAT “was the fact that the partnership did not keep basic business records”.

NOTE: The depreciation rules for small businesses have recently been amended. The changes only apply to small businesses (including connected or affiliated businesses) that have an aggregated turnover of less than $2 million. Businesses must keep appropriate records. From the 2012-2013 income year:

  • the small business instant asset write-off threshold has increased from $1,000 to $6,500;
  • small businesses can claim an accelerated initial deduction for motor vehicles acquired in 2012-2013 and subsequent years; and
  • the long-life small business pool and the general small business pool have been consolidated into a single pool to be written off at one rate.

 

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