Private ruling: Small business pool - instant asset write-off
Date of advice: 8 December 2021
Published: March 2022
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Am I required to claim a deduction for the full amount of the small business pool balance such that it will be written off at the end of the relevant income year under sections 328-180 and 328-210 of the Income Tax Assessment Act 1997 (ITAA 1997) as affected by sections 328-180 and 328-181 of the Income Tax (Transitional Provisions) Act 1997 (ITTPA 1997)? | A1: Yes. The small business pool balance is written off if it falls below the applicable asset write-off threshold for the relevant year. When using simplified depreciation, for depreciating assets in your small business pool where the income year ends before 6 October 2020, you continue to depreciate as normal until the pool balance falls below the instant asset write-off threshold. The threshold increased to $150,000 for income years ending 30 June 2020 and 30 June 2021. When your income years end between 6 October 2020 and 30 June 2022, you must deduct the balance of the small business pool at the end of the income year.

Relevant facts and circumstances: You are a small business entity. You use simplified depreciation. You are a 30 June balancer. You have been depreciating business assets using the small business general pool. At 1 July 20XX, your small business pool balance was $X.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 328 | Income Tax Assessment Act 1997 Subdivision 328-D | Income Tax Assessment Act 1997 section 328-180 | Income Tax Assessment Act 1997 subsection 328-180(1) | Income Tax Assessment Act 1997 subsection 328-180(2) | Income Tax Assessment Act 1997 subsection 328-180(3) | Income Tax Assessment Act 1997 section 328-190 | Income Tax Assessment Act 1997 section 328-210 | Income Tax Assessment Act 1997 subsection 328-210(1) | Income Tax (Transitional Provisions) Act 1997 Subdivision 40-BB | Income Tax (Transitional Provisions) Act 1997 section 328-180 | Income Tax (Transitional Provisions) Act 1997 section 328-181 | Income Tax (Transitional Provisions) Act 1997 subsection 328-181(1) | Income Tax (Transitional Provisions) Act 1997 subsection 328-181(5)

Reasons for decision: Summary: Division 328 of the ITAA 1997 provides the rules for small business entities. Subdivision 328-D of the ITAA 1997 provides the depreciation rules for small business entities choosing to use simplified depreciation. Subsections 328-180(1) and 328-180(2) of the ITAA 1997 provide that there is a deduction for assets whose cost is less than $1,000 in the income year in which you start to use the asset or have it installed ready for use. Subsection 328-180(3) provides that amounts of $1,000 or more are allocated to the general small business pool, which is described in section 328-185 of the ITAA 1997. Sections 328-190 and 328-210 of the ITAA 1997 provide the calculations for depreciating under the general small business pool and the low value pool, respectively. Neither section provides a mechanism for deducting a lesser amount than that which is prescribed. The note to subsections 328-180(1), 328-180(2) and 328-180(3) of the ITAA 1997 provide that the $1,000 threshold is increased by section 328-180 (about temporary increased access to accelerated depreciation) or section 328-181 (about temporary full expensing) of the ITTPA 1997. Subsection 328-180(1) of the ITTPA 1997 provide the relevant periods during which the threshold is increased. These changes are summarised in the table below. | Detailed Reasoning - Threshold: 12 May 2015 to 28 January 2019 $20,000 29 January 2019 to 2 April 2019 $25,000 3 April 2019 to 11 March 2020 $30,000 12 March 2020 to 30 June 2021 (provided the asset was purchased on, or after, 12 May 2015 and by 31 December 2020) $150,000 The small business pool balance is written off if it falls below the applicable asset write-off threshold for the relevant year. The threshold increased to $150,000 for income years ending 30 June 2020 and 30 June 2021. Further, subsection 328-181(5) of the ITTPA 1997 modifies the low value pool calculation in section 328-210 of the ITAA 1997 such that the words "less than $1,000 but" in subsection 328-210(1) of the ITAA 1997 are disregarded, in relation to an income year that ends on or after 6 October 2020, and on or before 30 June 2022. In other words, if your income years end between 6 October 2020 and 30 June 2022, you must deduct the balance of the small business pool at the end of the income year.