Owen is a sole proprietor of a Small Business Entity (SBE) with a turnover of le

Question

Owen is a sole proprietor of a Small Business Entity (SBE) with a turnover of less than $10 million. He purchased a new hydraulic press for $40,000 (GST exclusive) on 28 May 2017 which is used solely in his manufacturing business. The opening value of his small business pool was $30,000 on 1 July 2016. He sells the press on 30 June 2018 for $14,000 (GST exclusive). What are the Income Tax consequences in the 2017-2018 income year? Case Study 9 J Answer Div 328 capital allowances, small business asset pool, opening value of pool x 30%- $55,000 x 30% ($16,500)

Explanation / Answer

This is how you arrive at $55000

If the Small business pool purchased an asset that has value more than $20000 then it will be depreciated at 15% for the first year(irrespective of time the asset is purchased) and 30% from second year onwards. The Opening Value of Small Business is usually depreicated at 30%

Thus Opening Value at July 1 2016 = $30000 (Depreciated at 30%)

Purchased made during years = $40000 (Depreciated at 15%)

Closing Value of Assets as on June30 2017 = 30000 * (1 - 0.30) + 40000 * (1-0.30)

Closing Value of Assets as on June 30 2017 = $55000

Capital allowances for 2017 - 2018 = Closing value as on June 30 2017 * 30%

Capital allowances for 2017 - 2018 = 55000 * 30% = $16500

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