Depreciation of Technology Assets in Small Business

Technology can be a valuable tool for small businesses. Technology helps them to perform tasks more quickly and efficient. By their nature technology assets can often become quickly outdated and need to be replaced more often than physical assets and for this reason depreciation for technology assets is usually quicker than for physical assets. 

Immediate deduction

For small businesses assets that cost less that $20,000 can be immediately and fully deducted in the first year if the business has a turnover of less than $2 million per year. This can be a great option for items such as computers, tablets and point-of-sale equipment which come at a low cost. If you are unsure of whether your assets qualify then it can be a good idea to speak to an accountant for clarification. 

An asset pool

If you have a pool of assets of more expensive assets you can group these together and claim 15% in the first and 30% in subsequent years. This can often be easier for small businesses than claiming and accounting for each asset separately, particularly if you have a large pool of assets to account for.

Depreciation of software

If you are claiming for assets separately then the software is considered to have an effective life of 2.5 years and a depreciation rate of 40% by the Australian Tax Office. It's important when you are allowing for software assets to look at whether the price who are paying is for the rights to a software package or simply a monthly access fee. Low-cost software costing less than $300 per year can be generally be claimed in the first year under low-cost limits. 

Depreciation of technology assets

Depreciation rates for technology assets are  usually 25% per year for fixed assets and 33.3% per year for mobile assets such laptop computers, tablets or smartphones. This depreciation schedule may be quite finicky to upkeep if you have a business that does not meet the criteria for the small business accelerated depreciation. It can be well worth formalising a schedule to help you claim the correct amounts for depreciation each year, accounting for the time of purchase and any assets that are disposed of each year. 

If you rely on technology assets in your business it is a good idea to contract a specialist service to help you formalise a depreciation schedule for your business to ensure that the maximum tax benefits can be achieved and your profits can be maximised. For more information, contact a business such as Capital Claims Tax Depreciation.