Over $10m turnover with an SBE pool from prior years. Still w/o pool at 30/6/21?

[John]

Hi,

Have a client who is now over $10m actual and projected, so isn’t an SBE, but has an existing SBE pool with a large balance.

My reading is that the change to the pool write off threshold in section 328-210 will apply to this client, and they will be required to write off the pool at 30 June 2021. I would greatly appreciate hearing any thoughts on this; am I on the wrong track here?

@taxpolicyteam @RobynTax

Thanks,
John

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[crenshaw]

Great question John! Looking forward to hearing thoughts from others in the community.

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[John]

I’m writing it off

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[John]

Still interested to hear if anyone agrees or disagrees

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[RobynTax]

Hi John

You are correct. While the taxpayer has exited Subdiv 328-D of the ITAA 1997, the rules in Subdiv 328-D continue to apply to the taxpayer’s general small business pool for the income year in which they exit the simplified depreciation rules and all later years (s 328-220(1)).

The rule in s 328-210 (about low pool values) is temporarily modified by s 328-181(5) of the Income Tax (Transitional Provisions) Act 1997 which requires the taxpayer to fully deduct their general small business pool balance if the pool has a balance of “more than xero” on 30 June 2021. This rule applies even where the taxpayer has not chosen to apply Subdiv 328-D or is no longer a small business entity.

From 1 July 2022, the law reverts to the standard rule in s 328-210, which will require a small business entity to deduct their pool balance where its value is “less than $1,000 but more than zero”.

Regards
Robyn Jacobson, CTA
Senior Advocate
The Tax Institute

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[John]

Wonderful, many thanks for the clarification and confirmation Robyn

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[Author]

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