Are you eligible for investment allowance: Small Business and General Business Tax Break?

 

Investment allowance, such as a tax break, is a tax deduction on the cost of eligible assets.

 

To be able to take advantage of the investment allowance and claim additional deductions for new business investments one must comply with several criteria, that  must be satisfied depending whether it is a small business (SME) or general business.

 

Small business – the 50 percent bonus deduction is available:

 

The business turnover is less 2 million a year at the time of ordering the equipment.

The business commits to investing in the asset between 13 December 2008 and 31 December 2009.

 

Investment commitment time depends on the type of finance used to acquire an asset, generally when business enters into contract. Payment and delivery do not necessarily take place before 31 December 2009.  The asset needs to be installed by 31 December 2010. 

 

 

General business – 10 percent or 30 percent additional deduction 

 

The business turnover is $2 million a year or more at the time of ordering the equipment

The business commits to investing:

Ø     From 1 July 2009 to 31 December 2009 -10% deduction.

Ø     From 13 December 2008 till 30 June 2009  30% deduction

 

Investment commitment time depends on the type of finance used to acquire an asset, generally when business enters into contract. The asset needs to be installed by 31 December 2010. 

 

What can you buy?

 

The asset must be brand new, not second hand depreciable plant and equipment.

 

Ø     Cars, vans and other business vehicles

Ø     Computer hardware but not software.

Ø     Tools

Ø     Furniture

Ø     Capital improvements to existing machinery and equipment

Ø     Luxury cars - limits apply

 

Intangible assets are not eligible.

 

 

The assets acquisition is to be principally for business use (that is more than 50 percent)

Tax issues, such as car fringe benefit arise when an employer provides a car to an employee for private use.

 

Depending how profitable the business is tax deduction claims can be deferred. However, one must know that the tax break is not a cash rebate.

 

 

 

NOTE: This material provided can be used for information purposes only, but not as a tax advice. For the tax advice and further details please contact your tax advisor.