Money
Issue No. 47 - June/ july
How the investment allowance works
by Dr David Corkindale and Dr David Corkindale
With an “investing” tax bonus for business, is it time to spend in spite of economic stress? The once-only, additional tax deduction is 30% for most businesses and 50% for SMEs is available for new plant costing more than $10,000 for larger business and $1000 for SMEs. SMEs are defined as businesses turning over less than $2million.
The bonus is a once only additional tax benefit for:
• entering into contracts to acquire (or start building) new tangible depreciating assets, or
• making improvements to existing tangible depreciating assets
• Where the expenditure on the new items is $1000 or more for SMEs and $10,000 for all other business taxpayers. Based on the cost of the asset or improvement, the tax deduction bonus is either:
• 50% (originally 30%) for SMEs or
• for other businesses initially 30% of the cost,
• Reducing to 10% of the item’s costs based on time of order and implementation.
The tax bonus of 50% for SMEs is available in the financial years ending 30 June 2009 and 2010 and the six months to 31 December 2010, provided:
• the plant or improvement ordered from 13 December 2008 to 31 December 2009 (inclusive) and
• In the financial of the first use the asset or improvements (or have them ‘installed ready for use’) before the end of the 2009 or 2010 financial years or prescribed period to 31st December 2010. The tax bonus of 30% applies for larger businesses is available in the financial years ending 30 June 2009 and 2010 provided:
• the plant or improvement was ordered after 13 December 2008 but before 31 December 2009 (inclusive) and
• The first use the asset or improvements (‘installed ready for use’) before 30 June of the 2009 or 2010 financial years. The tax bonus drops to 10% for a business if the plant or improvement is ordered after 1 July 2009 but before 31 December 2009 and first use of the asset or improvements is after 1 July 2010 but...
