Converting from Non Small Business Entity (Non-SBE) to Small Business Entity (SBE)

Converting from Non Small Business Entity (Non-SBE) to Small Business Entity (SBE)

Converting from Non Small Business Entity (Non-SBE) to Small Business Entity (SBE)


File Conversions




Product:
AssetManager Pro

Country:
Relates to files set to Australia
(and where Australian Tax Depreciation laws are applied)

Version: 
2017 (v6)

MYOB Upgrade Info
All info below applies to AssetManager Pro 2017 (v6) or later

Prior versions including MYOB versions to not correctly support conversion




Overview

Australian business can access a range of concessions including payment, reporting and asset depreciation options under what is known as a Small Business Entity (SBE).

Eligibility is based on a turnover threshold (which as at the 1st of April 2017 is 10 million having prev. been 2 million). You can find more info about SBEs and Eligibility on the ATO website here.

As part of setting up a file in AssetManager Pro you can define to be a Non-Small Business Entity (Non-SBE) or a Small Business Entity (SBE) BUT it is also possible to change from a Non-SBE to an SBE.

This article focuses on the move from Non-SBE to an SBE which is supported as part of the Start a New Year process in AssetManager Pro.

Note: This feature has been enhanced as part of the AssetManager Pro 2017 release to ensure it complies with all the transitional requirements. Do NOT use prior releases to transition from Non-SBE to SBE!

Note: The following ONLY applies to Tax Depreciation settings (Book Depreciation is not affected)

What are the key differences/benefits of being classified as an SBE relating to Asset Depreciation

Small Business Entities have the ability to write-off Assets costing less than 20K as of the 1st of July 2017. 

In addition, all assets over that value are depreciating in what is known as the General SBE Pool and are depreciated on a Diminishing Value basis at the following rates:

Rate in the 1st Year of NEW Assets Pooled - 15%
Rate in the First Year of Old Assets Pooled - 30%
Rate in the Second Year for Assets continuing in the Pool - 30%



(For more information on the General SBE Pool click here - COMING SOON)

In moving from an Non-SBE to an SBE what happens to my existing Assets (How are they converted?)

As part of an Non-SBE you may have Assets that are depreciated as Diminishing Value, Prime Cost (Straight Line) or as part of the Low Value Pool.

These are converted in the following ways:

Low Value Pool (LVP) Assets


If an active Low Value Pool is detected you are given a choice to either

1. Retain the Low Value Pool
2. or to convert Low Value Pool assets to General Depreciation of DV at year 2 Pool rates (implications are gain/loss rather than Pool balance reduction)

If selecting to retain the Low Value Pool Assets that have in previous years been allocated to a Low Value Pool will stay in the Low Value Pool and continue to depreciate at the 37.5%pa and No more assets can be allocated to the Low Value Pool
 
If selecting to convert the Low Value Pool, Low Value Pool Assets converted to DV method for tax at 37.5% and the Low Value Pool will be made inactive

Capital Works Assets


If capital works assets are present in the file, these will need to be in (or moved to) a buildings type group and flagged as "capital works" as they are not eligible for pooling
    • Capital works assets will continue to be depreciated as they have in the past


All Other Assets


All other assets that are not flagged as Capital works or that are not in an LVP will be converted to the General Pool with the amount pooled set as the tax OWDV
  • Any assets acquired post conversion that cost more than the instant depreciation threshold will be added to the General SBE Pool by default unless the tax depreciation method is overridden.
  • Any assets acquired this year that cost less than the full depreciation threshold will default to Full Depreciation at Purchase. This can be over-ridden by selecting an alternate depreciation method however it will default to Full Depreciation at Purchase unless the tax depreciation method is overridden
Depreciation of the General SBE Pool will be at year 2+ rates for existing assets added to the General Pool during conversion and year 1 rates of any additions made post conversion until they reach their second year in the pool


For more information on how to move from a Non-Small Business Entity (Non-SBE) to a Small Business Entity (SBE) click here (COMING SOON)