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18 May 2009: Federal Budget investment allowance; boost for small business
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Urgent Bulletin: Investment allowance; further boost for small business
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Small business will benefit from the Federal Budget decision to extend and increase the Small Business tax break or investment allowance.
The new investment allowance helps small business cope with declining economic conditions by offering an increased incentive to invest in new capital assets.
The allowance, originally introduced as a 10% temporary tax break, was later raised to 30% and now to 50% for small businesses with an annual turnover of $2 million or less.
The allowance applies to assets acquired with a value over $1,000 excluding GST. The deadline for asset acquisition has been extended from 30 June 2009 to 31 December 2009. Assets must be installed and ready for use by 31st December 2010.
New vehicles are eligible for the 50% investment allowance.
The tax deduction is available in the year in which the asset is installed and held ready for use.
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Example: small business - Turnover $2 million or less
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Contract signed pre 31/12/09
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$30,000 car
excluding GST
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$70,000 car
excluding GST
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Delivered before 31/12/10
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Investment allowance 50%
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$15,000
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$28,590*
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Normal Depreciation deduction 25% ( diminishing Value Method)
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$7,500
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$14,295*
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Total Tax deduction in Year 1
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$22,500
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$42,885
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Source: Fordham motor dealer services
* Normal depreciation calculation is based on holding asset for the full financial year
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All other businesses continue to access the Tax Break at either 30 % or 10% depending on when the investment is made and installation time.
Other businesses
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New investment made by:
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Installed by
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30 June 2009
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31 December 2009
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30 June 2009
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30% in 2008-09
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None
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30 June 2010
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30% in 2009-10
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10% in 2009-10
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31 December 2010
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10% in 2010-11
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10% in 2010-11
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Further eligibility for the allowance includes the following:
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Eligible for tax break
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Not eligible
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Tangible depreciating assets for which a deduction is available under section 40-25 including:
Cars (except those using the ‘cents per kilometre’ method)
Tangible depreciating assets used by small business entities
Tangible depreciating assets used in R&D
Some intangible assets are considered depreciating assets if they are not trading stock under subsection 40-30(2)
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Intangible assets e.g. computer software and intellectual property rights.
Cars using the ‘cents per kilometre’ method
Land and trading stock
Capital works – buildings, construction expenditure, earthworks.
Water facilities
Second hand assets
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As legislation at the time of this release has not been finalised, specific eligibility criteria may not available or complete. For further advice, contact your tax accountant or call the Australian tax office on 132 866 or email investmentallowance@treasury.gov.au . Also, Treasury can be contacted on 02 6263 2111 or 1800 020 008.
Please see the ATO website for further information.
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