Federal Government Investment Allowance
Tuesday, June 16, 2009

 As you may be aware the Government has introduced a Small Business and General Business Tax Break, also known as the Investment Allowance.  It gives business the opportunity to claim an additional tax deduction on the cost of NEW, TANGIBLE and DEPRECIATING assets for which a deduction is available under Subdivision 40-B of the ITAA 1997 and new investment in existing assets.  

Small business's (turnover less than $2million) need to invest a minimum of $1,000 on an individual asset in order to qualify for a 50% investment allowance on the cost of eligible assets acquired between 13 December 2008 and 31 December 2009.

All other business (turnover greater than $2million) must reach a $10,000 threshold in order to qualify for a 30% investment allowance. 

In order to be eligible for the 30% deduction, customers need to have signed a contract / provided a purchase order or the asset must have started to be constructed by 30th JUNE 2009.  It may also be applied retrospectively to purchases made after 13th DECEMBER 2008. 

Small business's will be able to access the 50% investment allowance until 31st December 2009.

Purchases made after 1st JULY 2009 and before 31st DECEMBER 2009, will be eligible for a 10% tax deduction.

To meet the investment threshold taxpayers can aggregate expenditure in the following ways:

AGGREGATION OF IDENTICAL ASSETS > allows taxpayers to aggregate the eligible spend on identical or substantially identical assets to meet the requisite investment threshold.

ASSETS FORMING PART OF A SET> the eligible spend on assets may also be aggregated if they form part of a set. Items may be regarded as a set if they are dependent on each other, marketed as a set, or designed and intended to be used together.

KEY DATES

Asset under contract or begun construction > 13th December 2008 - 30th June 2009 > 30% TAX DEDUCTION

Installed and ready for use 30th June 2010

Asset under contract or begun construction > 1st July 2009 - 31st December 2009 > 10% TAX DEDUCTION

Installed and ready for use 31st December 2010

This is a "bonus" tax deduction, which applies in addition to any deductions for depreciation ordinarily applicable for the products purchased.

It is important to note this is subject to legislation being passed by parliament, though it is expected to pass unimpeded.  This is for information purposes only and businesses should seek their own taxation advice.