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INVESTMENT ALLOWANCE BONUS TAX DEDUCTION ENDS 31 DECEMBER – DON’T MISS OUT

 

Time is running out for business taxpayers to order new plant and equipment and still qualify for either the 50% or 10% investment allowance bonus tax deduction.

 

KEY DATES

 

To qualify for the investment allowance you need to:

 

  • Order eligible new plant or equipment by Thursday 31 December 2009 for use in your business (see below); or
  • Start to construct an asset by 31 December 2009; and also
  • Have your finance in place by 31 December 2009 (some exceptions apply); and
  • Start using the equipment by 31 December 2010 or have it installed ready for use by this date.

Note that the investment allowance does not apply to equipment ordered before noon on 13 December 2008 except where financed after this date.

 

WHAT RATE IS THE INVESTMENT ALLOWANCE TAX DEDUCTION?

 

Small Business Taxpayers – Annual Turnover under $2 Million

 

For small business entities (aggregated annual turnover under $2 million), the investment allowance tax deduction is 50% of the cost of qualifying plant and equipment costing $1,000 or more. Special rules apply for related assets.

 

Large Business Taxpayers – Annual Turnover over $2 Million

 

For taxpayers with larger turnovers, the deduction for equipment costing $10,000 or more, the deduction is:

 

  • 30% for equipment ordered by 30 June 2009 and installed by 30 June 2010; or
  • 10% for equipment ordered by 31 December 2009 and installed by 31 December 2010

WHAT IS ELIGIBLE PLANT AND EQUIPMENT?

 

The investment allowance applies to plant and equipment that is:

 

  • New (second hand assets don’t qualify but demonstrator cars may qualify)
  • Physical equipment (intangible assets such as software don’t qualify)
  • Plant (building structures don’t qualify but some contents such as lifts may be eligible)
  • Used in Australia predominantly for business purposes
  • Not trading stock (ie things you buy and sell as part of your business)

Cars can qualify for the investment allowance but not those which are used mainly for private purposes or are subject to deduction claims based on a cents per kilometre rate.

 

FINANCE ARRANGEMENTS AND THE INVESTMENT ALLOWANCE CUT OFF

 

If you are financing new plant and equipment, it is important to have your finance in place by the relevant date:

 

  • For luxury car leases (cars costing over $57,180) the lease agreement must be signed by 31 December 2009
  • If you lease other assets, you don’t qualify for the investment allowance – the finance company claims the deduction
  • For assets subject to hire purchase finance, the hire purchase agreement must be signed by 31 December 2009
  • For assets acquired under a chattel mortgage where the financier is the legal owner of the asset, the finance contract must be signed by 31 December 2009
  • For chattel mortgages where the financier only has a charge over the asset and you are the legal owner, you need to order the equipment from the supplier by 31 December 2009
  • Sale and lease back arrangements should be treated with caution

BOTTOM LINE

 

A significant Budget stimulus measure is about to end. Should you require further assistance or additional information please contact your PRT Chartered Accountant adviser.

 
Disclaimer

This newsletter is provided as general information only and does not consider your specific objectives, situation or needs. You should not rely on the information in this document without seeking appropriate professional advice. PRT Chartered Accountants accepts no responsibility to you or anyone else regarding this document and we are not responsible to you or anyone else for any loss suffered in connection with the use of this document or any of its content .