Small Business Pool Depreciation for Cars and Utes

The Small Business Entity (SBE) depreciation rules allow eligible small businesses to simplify their depreciation process by pooling assets for tax purposes. This includes motor vehicles, provided they meet specific criteria.

How the Small Business Pool Works

1. Eligibility: A business must be classified as a Small Business Entity (SBE) with an aggregated turnover of less than $10 million.

2. Pooling Assets: All depreciating assets (except those excluded by the ATO) are added to a single pool for depreciation.

3. Immediate Deduction Threshold: As of the 2024–25 financial year, if the cost of the motor vehicle (GST-exclusive) is below the instant asset write-off threshold (check the specific threshold for the year), the full amount can be claimed as an immediate deduction.

4. Depreciation Rates for the Pool:

   • 15% depreciation in the first year.

   • 30% depreciation in subsequent years.

     
     

Example: Small Business Pool Depreciation for a Motor Vehicle

Scenario:

• Business Type: GST-registered small business.

• Financial Year: 2024–25.

• Motor Vehicle Purchase Price (GST-inclusive): $60,000.

• GST Credit Claimed: $5,454 (1/11th of $60,000).

• GST-Exclusive Cost: $60,000 - $5,454 = $54,546.

• Usage: 80% business use, 20% private use.

• Threshold for Instant Write-Off: The vehicle cost exceeds the threshold in this example.

  
  

Steps to Calculate Depreciation:

1. Business-Use Portion of GST-Exclusive Cost: Business Use Cost=54,546×80%=43,637

2. Add to Small Business Pool: Since the cost exceeds the instant asset write-off threshold, the vehicle is added to the small business pool.

3. Depreciation for the First Year:

   • Initial Deduction (15%): Depreciation=43,637×15%=6,545.55

   • This amount is deducted in the business's tax return for the first year.

4. Depreciation for Subsequent Years:

   • The remaining pool balance will be depreciated at 30% annually.

     
     

Pool Balance After Year 1:

Pool Balance=43,637−6,545.55=37,091.45\text{Pool Balance} = 43,637 - 6,545.55 = 37,091.45Pool Balance=43,637−6,545.55=37,091.45

For the second year:

Depreciation=37,091.45×30%=11,127.43\text{Depreciation} = 37,091.45 \times 30\% = 11,127.43Depreciation=37,091.45×30%=11,127.43

Key Notes

• Private Use Adjustment: Depreciation is only claimable for the business-use portion of the asset.

• Thresholds: Instant asset write-off thresholds may vary by financial year. Ensure to verify the applicable limits.

• Simplification Benefit: Pooling assets simplifies depreciation by avoiding individual asset tracking.

  
  

This approach enables small businesses to maximise tax benefits while reducing administrative complexity. Always consult a tax professional for advice tailored to your specific circumstances.