Investment allowances for business

Frequently Asked Questions on the new Investment Allowance

The investment allowance provides a great incentive for businesses to invest in cars and equipment during the remainder of 2009. This has been made even more attractive for small businesses following the 2009/2010 budget changes.

Eligible assets

The assets must:

	be utilised in Australia
	be utilised for the principal purpose of carrying on a business
	new
	be a tangible asset normally subject to the depreciation (capital allowance) rules of Division 40 of the Income Assessment Tax Act 1997
	have a cost over the relevant threshold and be ordered by the cut off date (see below).

Multiple identical assets can be used to meet the investment threshold, as can assets that form part of a set.

Eligible assets include most depreciable assets such as computers, cars and equipment. Specific exclusions are software, buildings, trading stock, land, capital works, goodwill, intangible assets and rights.

Small business 50% Investment Allowance

A small business is a business with less than $2 million turnover.

A small business entity can receive a 50% investment allowance on assets costing $1,000 or more ordered between 13 December 2008 and 31 December 2009 and ready for use by 31 December 2010.

Larger businesses 30% and 10% Investment Allowance

Businesses with a turnover greater than $2 million will be eligible for the 30% investment allowance on assets costing $10,000 or more ordered between 13 December 2008 and 30 June 2009. These assets must be installed ready for use by 30 June 2010.

If the assets ordered prior to 30 June 2009 are installed in the period 1 July 2010 to 31 December 2010, the investment allowance drops to 10%.

If the assets are ordered in the period 1 July 2009 to 31 December 2009, the investment allowance amount is 10%, and the asset must be installed by 31 December 2010.

The investment allowance will be claimed in the year in which the asset is installed.

For example: A small business that buys a $30,000 new car before the end of June 2009, will be entitled to the following deductions:

After the first tax return is lodged, 65% of the cost of the car value has been allowed as a tax deduction.
After the second tax return is lodged, 90% of the car value has been allowed as a tax deduction.
Over the life of the car, 150% will be an allowable deduction.

When a new asset is acquired, you will not need to do anything additional to be eligible for the allowance. You will only need to inform Saward Dawson of the purchase and we will calculate the appropriate amount and include it in the tax return of the relevant year.

Also see our article on Frequently Asked Questions on the new Investment Allowance

Published : 28 May 2009