D-Day For The 30% Investment Allowance* Is Fast Approaching

June 30 is the deadline for the government’s proposed 30% Investment Allowance*. While you may might unsure of your immediate needs, you should be aware of different ways in which your business can take advantage of tax deductions.

The Australian Tax Office website ( www.ato.gov.au ) states the following on the proposed Investment Allowance (if this seems a little complicated then skip to the end of the article for what it means in plain English):

If passed, the tax break, in the form of an investment allowance will provide:

 

  • an additional tax deduction of 30 per cent of the cost of eligible new tangible depreciating assets acquired under a contract entered into, or started to be constructed, between 13 December 2008 and 30 June 2009 and first used, or installed ready for use, on or before 30 June 2010.
  • an additional tax deduction of 10 per cent of the cost of eligible new tangible depreciating assets acquired under a contract entered into or started to be constructed, between 13 December 2008 and 30 June 2009 and first used, or installed ready for use, between 1 July 2010 and 31 December 2010.
  • an additional tax deduction of 10 per cent of the cost of eligible new tangible depreciating assets acquired under a contract entered into, or started to be constructed, between 1 July 2009 and 31 December 2009 and first used, or installed ready for use, on or before 31 December 2010.

 

So what does this actually mean for businesses? Basically, purchases need not necessarily be completed by the June 2009 deadline. However, orders do need to be placed by then with delivery and installation scheduled for no later than June 30, 2010. This provides businesses with considerable flexibility for qualifying for the one-off tax deduction equal to an additional 30% of the capital cost on eligible new equipment and motor vehicles costing $10,000 or more.

For example, a piece of machinery worth $100,000 (with a $15,000 depreciation allowance) allows for a tax deduction of $30,000, equalling $45,000 in total for the first year.

Interest rates are currently at their lowest in 50 year (and they’re still falling!) while new equipment and motor vehicles are selling at bargain prices. The government stimulus is an opportune time for any small or medium business wishing to upgrade.

* Currently before the Senate

This article was submitted by Finlease. Visit www.finlease.com.au or call 1800 358 658 for more information. This article is general information only and does not take into account your specific circumstances. You should seek confirmation from your accountant.