Administrator Account posted on May 01, 2009 10:54
On 19 March 2009, the Government introduced legislation into Parliament to provide businesses with an additional tax deduction of 30 per cent of the cost of eligible new depreciating assets. This legislation has not been passed but in its draft form some of the key features have been listed below.
Eligibility
· The Tax Break is limited to new tangible, depreciating assets for which a deduction is available under Subdivision 40-B of the ITAA 1997 and new investments in existing assets. For example this includes furniture, plant and equipment and computers but does not include items such as:
o software (intangible) or
o capital works (different division of ITAA 1997) or
o leased assets, as these assets are not depreciated.
· Assets must be used principally in Australia for the principal purpose of carrying on a business. This is important for cars as you may need to keep a log book to demonstrate that the business use exceeds 50%.
· The amount of a taxpayer's investment in an asset needs to exceed a certain threshold ie. $1,000 for small business entities (turnover less than $2M) and $10,000 for all other taxpayers. Assets generally cannot be grouped unless they are part of the same asset.
· An asset is new if it has never been used or installed for use by anyone, anywhere. Second hand assets are not eligible for the Tax Break.
· Assets must be purchased and installed ready for use by certain key dates. A summary of these dates and the relevant tax rates are tabled below:
|
Purchased by
|
Installed by
|
Deduction Allowance
|
Year of deduction
|
|
30 June 2009
|
30 June 2009
|
30%
|
2009
|
|
30 June 2009
|
30 June 2010
|
30%
|
2010
|
|
31 December 2009
|
30 June 2010
|
10%
|
2010
|
|
31 December 2009
|
31 December 2010
|
10%
|
2011
|
Motor Vehicles
· Vehicles must be new or a demonstrator which has only been used for reasonable testing and trialling.
· You can finance the vehicle using a commercial hire purchase or chattel mortgage but not a lease.
· The maximum cost that can be claimed for motor vehicles is limited to the luxury car limit ($57,180 for 2009).
The allowance is not reduced for the private use of a vehicle but the vehicle has to be predominantly used for business.
Should you have any questions please read the Frequently Asked Questions issued by the Treasury. This provides further details on the points noted above.