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New Investment Allowance
Here is an update on the draft legislation on the Investment Allowance:
Q. On what asset purchases can I get the investment allowance for?
A. Tangible, depreciating assets for tax purposes such as:
Q. What assets purchases can't I get the investment allowance for?
- Intangible assets such as computer software and intellectual property rights
- Cars using the 'cents per kilometre' method
- Land
- Trading stock
- Horticultural plants, establishment of carbon sinks
- Capital works- buildings, construction expenditure
Q. The investment allowance is only available for new assets. What assets are considered to be 'new'?
A. The asset must never have been installed, ready for use by the taxpayer or another entity for any purpose, anywhere prior to 12 December 2008. Second hand assets are not eligible for the investment allowance.
Q. What about 'demonstrator' vehicles? Can I get the investment allowance on a 'demonstrator'?
A. Yes.
Q. Who gets the bonus deduction?
A. The bonus deduction can be claimed by the taxpayer that is entitled to tax deductions for the depreciation of the particular asset. e.g.
- The hirer in the case of a hire purchase agreement
- The borrower in the case of a chattel mortgage
- The lessee in the case of a luxury car lease
Q. Is there a minimum spend requirement?
A. Small businesses must spend at least $1,000 on each new asset in order for the investment allowance to apply and any other taxpayers must spend at least $10,000.
Q. When does the 30% or 10% additional deduction apply?
| | Contract entered into by: |
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30 June 2009 | 31 December 2009 |
| Asset installed by: | | |
| 30 June 2009 | 30% in 2008-09 | |
| 30 June 2010 | 30% in 2009-10 | 10% in 2009-10 |
| 31 December 2010 | 10% in 2010-11 | 10% in 2010-11 |
In order to obtain the 30% investment allowance in either 2008-09 year or the 2009-10 year, contracts to purchase assets should be entered into by the taxpayer between 13 December 2008 and 30 June 2009. However, the taxpayer must have started to use the asset or have it installed ready for use by 30 June 2010.
Q. What happens if I subsequently sell the asset?
A. You can still get the investment allowance if you subsequently dispose of the asset. This is provided that you can demonstrate at the time the asset was installed ready for use that the asset was to be used in Australia and for the purpose of carrying on a business.
Q. What happens if I stop using the asset for business purposes?
A. You can still get the investment allowance if you stop using the asset for business purposes. This is provided that you can demonstrate at the time the asset was installed ready for use that the asset was to be used in Australia and for the purpose of carrying on a business.
The business tax break is only available to the taxpayer who claims the depreciation therefore it will not apply to leased assets. Please do not hesitate to call us for finance assistance or any questions you may have in relation to this matter.
Kevin P Scambler
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