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Investment Allowance - Legislation Now Passed



All that remains for the Tax Laws Amendment (Small Business and General Business Tax Break) 2009 Bill   (passed by the Senate on 14 May 2009) is Royal Asset.


Many taxpayers wishing to take advantage of the announced investment allowance have been waiting for the announcement to become law before committing themselves to any new capital expenditure. Now, with the passage of the Bill through the Senate there is sufficient certainty and should prompt businesses to commit to the purchase of those capital assets.


To reiterate, the temporary investment allowance broadly provides for a temporary additional depreciation deduction for certain depreciating assets acquired with the principal purpose of being used in a business carried on by the taxpayer. The allowance is in addition to any 'ordinary' depreciation claimed. There are different rules for different taxpayers as follows:



Deductions Increased to 50% for Small Business Taxpayers


Small business entities (broadly businesses with an annual turnover of less than $2 million) are entitled to claim the additional investment allowance at the rate of 50% of the cost of eligible assets for the period of the investment allowance, i.e. assets acquired between 13 December 2008 and 31 December 2009, and installed by 31 December 2010. This increased rate was recently announced in the 2009-2010 Budget.


Prior to the Budget announcement, small business entities were subject to the same rate as other business taxpayers (see below).


The minimum investment for small business entities to take advantage of the investment allowance is a minimum of $1,000 per asset.



Other Business Taxpayers


Other business taxpayers (broadly businesses with an annual turnover of $2 million or more) are entitled to claim the additional temporary investment allowance for the cost of eligible business assets as follows:


a.         30% allowance for assets acquired (or commenced construction) between 13 December 2008 and 30 June 2009. The asset must be used (or installed ready for use) by 30 June 2010.


b.         10% allowance for assets:


             i.   Contracted for (or construction commenced) prior to 30 June 2009, but are used

                  (or installed ready for use)  between 1 July 2010 and 31 December 2010


            ii.   Contracted for (or construction commenced) between 1 July 2009 and 31 December

                  2009, and are used  (or installed ready for use) before 31 December 2010.


The minimum investment for ordinary businesses to take $10,000 per asset.


Disclaimer: The material contained in this publication is in the nature of general comment and information only and neither purports, nor is intended, to be advice on any particular matter. Readers should not act or rely upon any matter or information contained in or implied by this publication without taking appropriate professional advice. All financial figures are quoted in Australian Dollars unless otherwise indicated.