Tax Insights
Small Business and General Business Tax Break (Temporary Investment Allowance)
Recent proposed changes to the temporary investment allowance tax deduction extends the eligibility of small businesses to access the allowance. The changes also increase the allowance rate and extends the cut off for obtaining the allowance.
Legislation to implement these changes is awaiting Royal Assent.
Threshold decreased from $10,000 to $1,000
To be eligible for the temporary investment allowance, assets previously had to have a value greater than $10,000. This has now been reduced to $1,000 or more per asset for small businesses that have an annual turnover of $2 million or less. For other businesses, the threshold remains at more than $10,000 per asset.
Tax deduction increase
The temporary investment allowance rate has been increased from 10% to 30% for eligible assets that are acquired, or construction commenced after 13 December 2008 and before 1 July 2009 and installed by 30 June 2010.
A deduction equivalent to 10% of the purchase price of assets may also be claimed on assets acquired between 1 July 2009 and 31 December 2009 where the assets are installed ready for use by 31 December 2010. Small businesses can claim on all assets with a value of at least $1,000 whilst all other businesses can claim on assets with a value in excess of $10,000.
Temporary investment allowance extended to 31 December 2009
The cut off for acquiring or commencing the construction of assets has been extended from 30 June 2009 to 31 December 2009 and installed ready for use by 31 December 2010. However, the rate of investment allowance for assets acquired or commenced construction between 1 July 2009 and 31 December 2009 will remain at 10%.
What type of assets qualify?
The allowance can be claimed for spending on new assets and new expenditure on existing assets. For an asset to be new, it must not have been used by any taxpayer for any purpose before midnight on 12 December 2008. This means the allowance does not apply to second hand goods, but may apply to demonstrator assets which have been used for reasonable testing and trialling only. This includes demonstrator vehicles.
The assets must be new tangible assets used in Australia for the purpose of carrying on a business and for which a depreciation deduction is available.
The allowance applies to most new tangible depreciating assets, including plant and equipment, but it excludes items including trading stock, capital works such as land and buildings and intangible assets and rights. Computer software is specifically excluded from the temporary tax break. Taxpayers who calculate motor vehicle expenses under the 12% of the original value method are eligible for the allowance. The tax break is not available where motor vehicle expenses are calculated under the cents per kilometer method.
Claiming the allowance
The allowance is claimed as a tax deduction through the taxpayer's income tax return, in the year the cost is incurred.
The allowance is applied at a rate of either 10% or 30% of the assets cost, determined by the date of the acquisition. Cost is defined as the first element of capital allowance cost or the cost of acquiring the asset excluding GST. If the allowance is being claimed for new expenditure on an existing asset, the allowance is claimed on the second element of capital allowance cost. For example improving or changing an existing asset.
You will still be able claim the normal capital allowance depreciation deductions. The investment allowance is in addition to these deductions.
Household Stimulus Package
Key elements of the package are:
- Tax bonus for working Australians
- Single income family bonus
- Back to school bonus
- Training and learning bonus
- Farmers hardship bonus
A summary of the Tax Bonus for Working Australians is provided below. Additional details about this bonus are provided in the ATO tax bonus payment overview. Details about the other elements of the Household Stimulus Package can be found in the Family Assistance Office summary. For further information, please contact MPR.
Tax Bonus for Working Australians
Australian residents who had a taxable income of $100,000 or less in the 2007/08 financial year will potentially receive a bonus of up to $900.
To qualify for the bonus, they must have a net tax liability in their 2007/08 tax return, after allowing for any imputation credits or other tax offsets.
If this condition is met, the bonus entitlement will depend on their taxable income level for the 2008 year, as per the following table:
| Taxable income in 2007/08 |
Bonus |
| $80,000 or less |
$900 |
| $80,001 to 90,000 |
$600 |
| $90,001 to $100,000 |
$250 |
Claiming the tax bonus
Eligibility for the Tax Bonus for Working Australians does not depend on family taxable income. Therefore, if one member of a couple had a taxable income greater than $100,000 for the 2008 year, their lower or middle-income spouse may still be eligible.
Additionally, it's not necessary to have received income from employment (or self-employment) in 2007/08.
If you are yet to lodge your 2007/08 tax return, you will have to do so before 30 June 2009 to be eligible for the bonus.
Payments will be made automatically by the ATO from April 2009, through electronic transfer or cheque. The payment method will depend on which of these options you have selected in your 2007/08 tax return. The bonus cannot be used to offset any future tax liability.
The payment is not taxable and will not be assessed for social security purposes. |
