• 19 August, 2025

Simplified Depreciation Rules for Small Businesses (2025 Guide – Australia)

Running a small business in Australia means staying on top of tax rules — and depreciation is one area where many business owners either miss opportunities or make costly mistakes.

The good news? The Australian Taxation Office (ATO) offers simplified depreciation rules to make claiming deductions easier and more efficient.

In this guide, we’ll break down everything you need to know about small business depreciation in 2025, including instant asset write-offs, pooling rules, and compliance tips.

What Are Simplified Depreciation Rules?

Simplified depreciation rules are designed to reduce the complexity of calculating asset depreciation for small businesses.

You can apply these rules if your business has an aggregated turnover of:

• Less than $10 million (current threshold)
• Previously $2 million (for earlier income years)

Your aggregated turnover includes your business plus any affiliates or connected entities.

Key Features of Small Business Depreciation

The simplified system includes two main components:

1. Instant Asset Write-Off

This allows you to immediately deduct the business portion of an asset if it falls under the threshold.

For 2023–24 and 2024–25:

• Threshold: $20,000
• Applies per asset
• Asset must be installed and ready for use

This is one of the most powerful tax-saving tools available to small businesses.

2. Small Business Pool

Assets that exceed the threshold are grouped into a depreciation pool.

Depreciation rates:

• 15% in the first year
• 30% in following years

👉 If the pool balance falls below the threshold, you can write off the entire remaining amount.

How Instant Asset Write-Off Works

You can claim:

• New or second-hand assets
• Business-use portion only
• Additional improvement costs (if under threshold)

Important:
If you’ve already written off an asset, you can still claim future improvements, provided they meet the eligibility criteria.

Rules You Must Follow

If you choose simplified depreciation:

✔ You must apply it to all eligible assets
✔ You cannot pick and choose individual rules
✔ Only claim the business-use percentage
✔ Some assets (like certain vehicles) have limits

What Happens If You Opt Out?

If you stop using simplified depreciation:

• You must switch to general depreciation rules
• Recalculate asset values
• Adjust pool balances if re-entering later

This can become complex — so professional guidance is recommended.

Record-Keeping Requirements

The ATO requires you to keep records for at least 5 years, including:

• How you calculated your opening pool balance
• Changes in business use percentage
• Details of asset purchases and disposals

Accurate bookkeeping ensures:
✔ Correct deductions
✔ Audit protection
✔ Stress-free tax lodgement

Why This Matters for Your Business

Using simplified depreciation correctly can:

✅ Reduce your taxable income
✅ Improve cash flow
✅ Simplify compliance
✅ Help avoid ATO penalties

However, incorrect claims or poor records can lead to audit risks and denied deductions.

Need Help with Depreciation or Tax Planning?

At Workpaper, we help small businesses stay compliant while maximising tax benefits. Whether it’s depreciation, bookkeeping, or tax strategy — our experts are here to help.

📞 Contact Us Today

Phone: 0485 825 915
Email: info@workpaper.com.au

Website: https://workpaper.com.au/

Address: 7 Bridge St, Werribee, VIC 3030