Investment Allowance - small business

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					Investment Allowance – Extra incentive for small business

In December 2008 the Federal Government announced an investment allowance
would be made available for businesses that purchase new plant and equipment.
The allowance enables businesses to claim an extra tax deduction as a percentage
of the cost of the new plant and equipment.

The recent Federal Budget saw the Rudd Government expand the investment
allowance for small businesses, while previous announcements regarding larger
businesses remain the same. The legislation introducing this allowance has now
been passed by Parliament.

A small business is defined as one that has an annual turnover (i.e. gross income)
of less than $2 million per annum.

Based on the legislation now passed, the following rules apply to small businesses
wishing to claim this allowance:

•   The investment allowance must be on new plant and equipment (not second
    hand equipment).
•   The assets purchased must be tangible assets. A new computer is fine, but
    software is not (it is an intangible asset).
•   The minimum spend on the cost of new plant and equipment for a small
    business is $1,000.
•   The taxpayer must own the new plant and equipment.
•   A business can finance the purchase of the new plant and equipment,
    provided the taxpayer has ownership of the plant and equipment. For
    example, financing using a loan or chattel mortgage is fine, but not a lease.
•   The investment allowance has been increased for small businesses from 30%
    of the cost of the new plant and equipment to 50% of the cost.
•   All new plant and equipment purchases committed to by a small business
    between 13 December 2008 and 31December 2009 are eligible for the
    investment allowance.
•   The new plant and equipment must be installed by 31 December 2010 to get
    the full allowance.
•   A small business can “aggregate” the costs of new assets that are essentially
    identical, or form part of a set, to meet the $1,000 threshold.
When can you claim the investment allowance?

This extra deduction is only available in the tax year the new plant and equipment
is installed ready for use. This can be summarised as follows:

    When the asset is              When the asset is first              What tax year is the
        ordered                      installed for use                  deduction available?
      1 June 2009                      29 June 2009                        30 June 2009
      1 June 2009                      14 July 2009                        30 June 2010
   1 September 2009                 31 December 2009                       30 June 2010
   31 December 2009                   31 August 2010                       30 June 2011


If you run a small businesses that is looking for extra tax deductions as part of your
30 June 2009 year end planning, the purchase of new plant and equipment for
your business, and making sure it is ready for use by 30 June 2009, is worth

An Important Message
While every effort has been made to provide valuable, useful information in this publication, this firm
and any related suppliers or associated companies accept no responsibility or any form of liability
from reliance upon or use of its contents. Any suggestions should be considered carefully within your
own particular circumstances, as they are intended as general.

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