The bill implementing the new temporary investment allowance has received Royal Assent and is now law. Businesses can now act with certainty when claiming the allowance.
In the May 2009 budget, the Government announced that it planned to increase the rate of the one-off bonus tax deduction available to small businesses under the small business and general business tax break to 50% where a small business acquires an eligible asset between 13 December 2008 and 31 December 2009. Eligible assets must be installed and ready for use no later than 31 December 2010.
In order to be eligible for the lower threshold, that is $1,000 for eligible assets (rather than $10,000), a taxpayer needs to be a small business entity for the income year in which they first claim the capital allowance. Taxpayers that are eligible for the lower threshold for an income year are able to claim 50% of the new investment amounts that income year. This is in addition to normal capital allowances.
Taxpayers should consider that the allowance is a tax deduction and reduces taxable income. In addition, if an eligible asset is financed, the asset as well as the cost of the finance may also be tax deductible. Whilst the allowance is generally well received by businesses, care should be taken to understand to what level a business qualifies and whether assets acquired satisfy the requirements of the law.
If you plan to purchase assets before theend of the year and are unsure about your eligibility or your intended purchases for the investment allowance, please speak to one of our team.