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Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011

Schedule 2 Increase to the small business instant asset write-off threshold

Part 1 Amendments contingent on the Minerals Resource Rent Tax

Income Tax Assessment Act 1997

1  Paragraph 328-5(a)

Omit “a long life pool or a general pool and treat each pool”, substitute “a general pool and treat the pool”.

2  Section 328-170

Omit “Broadly, a”, substitute “Broadly, the”.

3  Section 328-170

Omit “for most depreciating assets, and 5% for depreciating assets that have an effective life of 25 years or more”.

4  Section 328-170

Omit “an immediate deduction for low-cost assets”, substitute “a deduction for assets whose cost is less than $5,000 in the income year in which you start to use the asset or have it installed ready for use”.

5  Subsection 328-175(1) (note)

Omit “small business pools”, substitute “general small business pool”.

6  Subsection 328-175(8)

Omit “a pool”, substitute “your * general small business pool”.

7  Subsection 328-175(10) (note 2)

Omit “small business pools”, substitute “general small business pool”.

8  Section 328-180 (heading)

Repeal the heading, substitute:

328-180   Assets costing less than $5,000

9  Paragraph 328-180(1)(b)

Omit “ * low-cost asset”, substitute “depreciating asset whose * cost as at the end of the income year in which you start to use it, or have it installed ready for use, for a taxable purpose is less than $5,000”.

10  Subsection 328-180(2)

Omit “a * low-cost asset”, substitute “an asset”.

11  Paragraph 328-180(2)(a)

Omit “$1,000”, substitute “$5,000”.

12  Subsection 328-180(3)

Omit “A * low-cost asset”, substitute “An asset”.

13  Paragraph 328-180(3)(a)

Omit “$1,000”, substitute “$5,000”.

14  Subsection 328-185(1)

Omit “ * low-cost”.

15  Subsection 328-185(2)

Repeal the subsection, substitute:

             (2)  There is a general small business pool to which * depreciating assets are allocated.

16  Paragraph 328-185(3)(c)

Omit “or * long life small business pool”.

17  Subsection 328-185(3)

Omit “or long life small business pool according to its * effective life”.

18  Subsection 328-185(4)

Omit “appropriate”, substitute “ * general small business”.

19  Subsection 328-185(5) (heading)

Repeal the heading, substitute:

Exception for assets used or installed before 1 July 2001

20  Subsection 328-185(5)

Omit “a * long life small business pool to which it would otherwise have been allocated”, substitute “the * general small business pool”.

21  Subsection 328-185(7)

Omit “or * long life small business pool”.

22  Subsection 328-185(7) (note)

Omit “small business pools”, substitute “general small business pool”.

23  Subsection 328-185(7) (example)

Repeal the example.

24  Subsection 328-190(1)

Omit “each pool”, substitute “your * general small business pool”.

25  Subsection 328-190(1) (formula)

Repeal the formula, substitute:

26  Subsection 328-190(1)

Omit “where:”.

27  Subsection 328-190(1) (definition of pool rate )

Repeal the definition.

28  Subsection 328-190(2)

Repeal the subsection, substitute:

             (2)  Your deduction for each * depreciating asset that you start to use, or have * installed ready for use, for a * taxable purpose during an income year for which you are a * small business entity and choose to use this Subdivision is 15% of the * taxable purpose proportion of its * adjustable value.

29  Subsection 328-190(4)

Repeal the subsection (not including the note), substitute:

             (4)  The amount you can deduct is 15% of the * taxable purpose proportion of the cost addition amount.

30  Subsections 328-195(1) and (2)

Omit “a pool”, substitute “your * general small business pool”.

31  Subsection 328-195(2) (note)

Omit “small business pools”, substitute “general small business pool”.

32  Subsection 328-195(3)

Omit “a pool”, substitute “your * general small business pool”.

33  Section 328-200

Omit “a pool” substitute “your * general small business pool”.

34  Section 328-200 (method statement, steps 1 and 2)

Omit “that pool”, substitute “the pool”.

35  Paragraph 328-205(1)(a)

Omit “or * long life small business pool”.

36  Paragraph 328-205(4)(b)

Omit “and the asset is allocated to a * general small business pool”.

37  Subparagraph 328-205(4)(b)(ii)

Omit “pool; or”, substitute “pool.”.

38  Paragraph 328-205(4)(c)

Repeal the paragraph.

39  Subsection 328-205(4) (example)

Repeal the example, substitute:

Example:    When Bria’s computer was allocated to her general small business pool for the 2012-13 income year, she estimated that it would be used 50% for her florist business. Due to increasing business, Bria estimates the computer’s use to be 70% for the 2013-14 year, and 90% for the 2014-15 year. She makes an adjustment under section 328-225 for both those years.

                   Bria sells the computer for $1,000 at the start of the 2016-17 income year. She must now average the business use estimates for the computer for the year it was allocated to the pool and the next 3 years to work out the taxable purpose proportion of its termination value. The average is worked out as follows:

·          50% (original estimate); plus

·          70% (2013-14 estimate); plus

·          90% (2014-15 estimate); plus

·          90% (no change on previous year);

=300% ÷ 4 = 75%

                   The taxable purpose proportion of the computer’s termination value is, therefore:

                   75% of $1,000 = $750

40  Subsection 328-210(1)

Omit “or * long life small business pool”.

41  Subsection 328-210(1)

Omit “$1,000”, substitute “$5,000”.

42  Subsection 328-210(2)

Omit “that pool” (wherever occurring), substitute “the pool”.

43  Subsection 328-210(3) (example)

Repeal the example, substitute:

Example:    Amanda’s Graphics is a small business entity for the 2012-13 income year and chooses to use this Subdivision for that year. The business has an opening pool balance of $7,000 for its general small business pool for that year.

                   During that year, Amanda acquired a new computer for $8,000. The taxable purpose proportion of its adjustable value is:

                   $8,000 × 85% business use estimate = $6,800

                   Amanda also sold her business car for $9,600 during that year. The car was used 100% in the business.

                   To work out whether she can deduct an amount under this section, Amanda uses this calculation:

                   $7,000 + $6,800 - $9,600 = $4,200

                   Because the result is less than $5,000, Amanda can deduct the $4,200 for the income year. The pool’s closing balance for the year is zero.

44  Subsection 328-215(2)

Omit “a pool”, substitute “your * general small business pool”.

45  Subsection 328-215(4)

Omit “low-cost assets”, substitute “assets costing less than $5,000”.

46  Subsection 328-220(1)

Omit “and * long life small business pool”.

47  Subsection 328-220(2)

Omit “a pool”, substitute “your * general small business pool”.

48  Subsection 328-225(2)

Omit “or * long life small business pool”.

49  Subsection 328-225(3) (paragraph (b) of the definition of asset value )

Omit “or a * long-life small business pool”.

50  Paragraph 328-225(5)(a)

Repeal the paragraph, substitute:

                     (a)  you do not need to make an estimate or an adjustment under this section for a * depreciating asset for an income year that is at least 3 income years after the income year in which the asset was allocated; and

51  Paragraph 328-243(2)(b)

Omit “or * long life small business pool”.

52  Subsection 328-247(1)

Omit “and * long life small business pool”.

53  Subsection 328-247(1) (example)

Omit “subsection 328-190(1)”, substitute “section 328-210”.

54  Subsection 328-247(2)

Omit “or * long life small business pool”.

55  Subsection 328-250(1)

Omit “low-cost assets”, substitute “assets costing less than $5,000”.

56  Subsection 328-250(3) (example)

Omit “a low-cost asset”, substitute “an asset”.

57  Subsection 328-250(4) (heading)

Repeal the heading, substitute:

Special rule for assets costing less than $5,000

58  Paragraph 328-250(4)(a)

Omit “a * low-cost asset”, substitute “an asset of a kind mentioned in paragraph 328-180(1)(b)”.

59  Subsection 328-253(4) (heading)

Repeal the heading, substitute:

Special rule for expenditure on assets costing less than $5,000

60  Paragraph 328-253(4)(a)

Omit “a * low-cost asset”, substitute “an asset of a kind mentioned in paragraph 328-180(1)(b)”.

61  Paragraph 328-255(1)(a)

Omit “or * long life small business pool”.

62  Paragraph 328-255(1)(b)

Omit “that pool”, substitute “the pool”.

63  Subsection 995-1(1) (paragraph (b) of the definition of closing pool balance )

Omit “or a * long life small business pool”.

64  Subsection 995-1(1) (definition of long life small business pool )

Repeal the definition.

Income Tax (Transitional Provisions) Act 1997

65  After section 328-195

Insert:

328-200   General small business pool for the 2012-13 income year

             (1)  This section applies for the purposes of applying Subdivision 328-D of the Income Tax Assessment Act 1997 for the 2012-13 income year and later income years.

             (2)  A depreciating asset that had been allocated to your long life small business pool is treated as being allocated to your general small business pool.

             (3)  The opening pool balance of your general small business pool for the 2012-13 income year is taken to be the sum of:

                     (a)  the closing pool balance of your general small business pool for the 2011-12 income year, reduced or increased by any adjustment required under section 328-225 of that Act; and

                     (b)  the closing pool balance of your long life small business pool for the 2011-12 income year, reduced or increased by any adjustment required under that section.

66  Application of amendments

The amendments made by this Part of this Schedule apply in relation to the 2012-13 income year and later income years.



 

Part 2 Amendments contingent on the Clean Energy package

Income Tax Assessment Act 1997

67  Section 328-170

Omit “$5,000”, substitute “$6,500”.

68  Section 328-180 (heading)

Repeal the heading, substitute:

328-180   Assets costing less than $6,500

69  Paragraphs 328-180(1)(b), (2)(a) and (3)(a)

Omit “$5,000”, substitute “$6,500”.

70  Subsection 328-210(1)

Omit “$5,000”, substitute “$6,500”.

71  Subsection 328-210(3) (example)

Omit “$5,000”, substitute “$6,500”.

72  Subsections 328-215(4) and 328-250(1)

Omit “$5,000”, substitute “$6,500”.

73  Subsection 328-250(4) (heading)

Repeal the heading, substitute:

Special rule for assets costing less than $6,500

74  Subsection 328-253(4) (heading)

Repeal the heading, substitute:

Special rule for expenditure on assets costing less than $6,500

75  Application of amendments

The amendments made by this Part of this Schedule apply in relation to the 2012-13 income year and later income years.