Investment Allowance: Small business and general business Tax Break
The Government has announced an investment allowance tax break for business.
The tax break, in the form of an investment allowance will provide:
- an additional tax deduction of 30 per cent of the cost of eligible new depreciating assets acquired under a contract, or started to be constructed, after 12.01am AEDT 13 December 2008 and before the end of June 2009 and installed ready for use by the end of June 2010.
- an additional tax deduction of 10 per cent of the cost of eligible new depreciating assets acquired under a contract, or started to be constructed, between 1 July 2009 and 31 December 2009 and installed ready for use by the end of December 2010.
New expenditure on existing assets may also qualify.
For both periods, small businesses will be able to claim the deduction for eligible assets costing $1,000 or more. Small businesses must have a turnover of less than $2 million a year to qualify.
For other businesses, a minimum expenditure threshold of $10,000 applies.
FAQ's
1. On what asset purchases can I get the investment allowance for?
Tangible, depreciating assets for tax purposes such as:
- Cars (except those using the ‘cents per kilometre’ method)
- Machinery
- Equipment
2. What assets purchases can’t I get the the investment allowance for?
- Intangible assets such as computer software and intellectual
- property rights
- Cars using the ‘cents per kilometre’ method
- Land
- Trading stock
- Horticultural plants, establishment of carbon sinks
- Capital works- buildings, construction expenditure
3. The investment allowance is only available for new assets. What assets are considered to be ‘new’?
The asset must never have been installed, ready for use by the taxpayer or another entity for any purpose, anywhere prior to 12 December 2008.
Second hand assets are not eligible for the investment allowance.
4. What about ‘demonstrator’ vehicles? Can I get the investment allowance on a ‘demonstrator’?
Yes.
5. Who gets the bonus deduction?
The bonus deduction can be claimed by the taxpayer that is entitled to tax deductions for the depreciation of the particular asset.
e.g.
The hirer in the case of a hire purchase agreement
The borrower in the case of a chattel mortgage
The lessee in the case of a luxury car lease
Luxury car leases are generally treated as loan transactions for income tax purposes. The lessee is treated as the owner of the car and is entitled to tax deductions for the finance charge and depreciation based on the cost of the car, capped at the car limit for the relevant income year. For cars first held in the 2008-09 financial year, the limit is $57,180. Vehicles that cost more than the car limit for the particular income year are generally considered to be luxury cars.
6. Is there a minimum spend requirement?
Small businesses must spend at least $1,000 on each new asset in order for the investment allowance to apply and any other taxpayers must spend at least $10,000.
7. When does the 30% or 10% additional deduction apply?
| Contract entered into by: | ||
| 30 June 2009 | 31 December 2009 | |
| Asset installed by: | ||
| 30 June 2009 | 30% in 2008-09 | |
| 30 June 2010 | 30% in 2009-10 | 10% in 2009-10 |
| 10% in 2009-10 | 10% in 2010-11 | 10% in 2010-11 |
In order to obtain the 30% investment allowance in either 2008-09 year or the 2009-10 year, contracts to purchase assets should be entered into by the taxpayer between 13 December 2008 and 30 June 2009. However, the taxpayer must have started to use the asset or have it installed ready for use by 30 June 2010.
8. What happens if I subsequently sell the asset?
You can still get the investment allowance if you subsequently dispose of the asset. This is provided that you can demonstrate at the time the asset was installed ready for use that the asset was to be used in Australia and for the purpose of carrying on a business.
9. What happens if I stop using the asset for business purposes?
You can still get the investment allowance if you stop using the asset for business purposes. This is provided that you can demonstrate at the time the asset was installed ready for use that the asset was to be used in Australia and for the purpose of carrying on a business.
Disclaimer:
Please note that this not financial or taxation advice. The legislation
to formalise this proposed allowance has yet to be enacted and
consequently the availability of this allowance cannot be relied
upon. Macquarie makes no representation or warranty that any
enabling legislation will be enacted whether in a form consistent
with that described above or otherwise, and hereby disclaims any
and all liability. Your clients must be advised to seek independent
professional advice specific to their circumstances in connection with
the proposed allowance.
Content taken from the Macquarie Bank Investment Allowance FAQ pdf.
