Government Triples the Temporary Investment Allowance

Are You a Small or General Business Owner?

At a glance: The Government recently announced a 30% temporary business tax break to support the economy.

The Government has announced the Small Business and General Business Tax Break, under which small and general business owners can claim additional tax deductions. This replaces the 10% temporary investment allowance which was announced by the Government in December 2008 [Click here for more information].

For small businesses with annual turnover of $2 million or less, the new investment allowance allows for a 30% tax deduction on all eligible purchases that meet the minimum $1,000 threshold. All other business can receive the same deductions for eligible assets costing greater than $10,000. The additional tax deduction is calculated as 30% of the cost of the depreciating asset, to the extent that it will be used for a taxable purpose in carrying on a business. For example, a small business that buys and installs a $2,000 computer can claim an additional $600 tax deduction.

The 30% deduction is in addition to the tax deductions available for depreciation under Div 40 of the Tax Act.

To qualify for the investment allowance, the following requirements must be satisfied:

a. The taxpayer must start to hold the asset under a contract entered into between December 13, 2008 and June 30, 2009;

b. The asset must be in use or installed ready for use by June 30, 2010;

c. The asset must qualify for deductions for decline in value under Div 40 (capital allowances provisions) and must be used in Australia;

d. For assets that are partly used for private or non taxable purposes, only the portion that is used for a taxable purpose in carrying on a business will qualify for the 30% investment allowance.

Eligible assets purchased from July 1, 2009 to December 31, 2009 will only qualify for a 10% deduction. Full details of the new investment allowance are available by clicking by visiting the Treasurers website at http://www.treasurer.gov.au

Remember: You must be aware of the new small business and general business tax break and the requirements of the new investment allowance. Contact us if you require any clarification or advice.