Deduction on depreciating assets.
Dear Clients,
We wish to remind you that the investment allowance offers taxpayers a 30% or 10% deduction for the cost of acquiring tangible, depreciating assets within the established time frame. Small businesses (turnover less than $2 million) will obtain a 50% deduction.
The relief is temporary and deduction is as follows:
| Business entity | Investment commitment time (inclusive) | Date of first use or installed ready for use (inclusive) | Rate |
|---|---|---|---|
| Small business | 13 December 2008 to 31 December 2009 | By 31 December 2010 | 50% |
| Other business | 13 December 2008 to 30 June 2009 | By 30 June 2010 | 30% |
| 1 July 2009 to 31 December 2009 | By 31 December 2010 | 10% | |
| 13 December 2008 to 30 June 2009 | 1 July 2010 to 31 December 2010 | 10% |
Investment thresholds apply
New investment in an asset must be made between 13 December 2008 and 31 December 2009 for any deduction to apply and the amount of your investment in an asset needs to meet a certain threshold. The 'new investment threshold' is:
- $1,000 for small business entities, and
- $10,000 for all other business.
Please note that intangible assets, software and second hand assets are not qualified for the investment allowance.
Hire Purchase and Lease Agreement
If you are not a small business entity (that is, you have a turnover of $2 million or more), you intend to acquire a depreciating asset under a hire purchase arrangement or enter into a luxury car lease and want to claim the 30% business tax break, you need to enter into the hire purchase arrangement or lease agreement by 30 June 2009, not just make an order contract with the supplier by that date. If you are a small business entity, you will have until 31 December 2009 to enter into the hire purchase arrangement or lease agreement under which you will hold the asset to be eligible for the tax break.
Small business entities need to commit to investing in an asset between 13 December 2008 and 31 December 2009 to qualify for the 50% deduction and meet all other eligibility criteria.
Should you need any further information or explanation, please do not hesitate to contact us.
Kelvin Boyd
Director