Investment Allowance



The Federal Government’s recently announced Investment Allowance provides the perfect opportunity for eligible businesses to upgrade or pull forward their vehicle purchases.

On 19th March 2009, the Tax Laws Amendment (Small Business and General Business Tax Break) Bill 2009 was introduced into Federal Parliament.  Further amendments were added to this legislation as part of the Federal Budget on the 12th May 2009, which increased the tax deduction available for small business from 30% to 50%.

The Federal Government's Investment Allowance provides a "one-off" bonus tax deduction; over and above the standard depreciation allowance.

Specific details are:

    Small business entities, with a turnover of less than $2 million per year, will be able to claim an additional tax deduction of 50% for eligible new vehicles costing $1,000 or more (exclusive of GST) acquired from 13th December 2008 until 31st December 2009, and installed ready for use by 31st December 2010.

    Other businesses will be able to claim an additional tax deduction of 30% for eligible new vehicles costing $10,000 or more (exclusive of GST) acquired from 13th December 2008 until 30th June 2009, and installed ready for use by 30th June 2010.

    Other businesses will be able to claim an additional tax deduction of 10% for eligible new vehicles costing $10,000 or more (exclusive of GST) acquired from 1st July 2009 until 31st December 2009, and installed ready for use by 31st December 2010.

New vehicles qualify for the Investment Allowance, except where the taxpayer uses the cents per kilometre method to determine their car expense deductions.
Eligibility will depend on your specific circumstances and businesses need to obtain their own independent tax advice.

The investment allowance forms part of the Federal Government's economic stimulus package, so it's a good time to fully assess this opportunity with a view to upgrading your vehicle(s) this year, or maybe bringing forward your purchase(s) from 2010, and taking advantage of this special tax break

Qualifications

The investment allowance would apply:-

    * to eligible businesses that are entitled to tax depreciation deductions in relation to motor vehicles;
    * to new vehicles (which could include a demonstrator vehicle under certain conditions) that meet the investment thresholds;
    * to vehicles used in Australia for the principal purpose of carrying on a business; and
    * for the income year in which the vehicle is first used or installed ready for use;.

 
Potential benefits of purchasing a vehicle

If a small business for example, with an annual turnover of less than $2 million, purchases a $30,000 vehicle, that business could potentially gain an additional tax deduction of $15,000 over and above the standard depreciation allowance.

Note, this example is provided for illustrative purposes only in order to demonstrate potential tax deductions.

Also, business owners need to obtain their own independent tax advice on this matter to ensure eligibility and correct application of the legislation.
Please note all of the above information is not to be considered tax advice and you should seek independent advice that factors in your individual circumstances.

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