Investment Allowance

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Small Businesses (with turnovers under $2M) can claim an investment allowance of 50% for the purchase of eligible assets ordered between 13th December 2008 and 31st December 2009, subject to the eligible asset being installed by 31st December 2010. The Investment Allowance does not affect the amount of depreciation that can be claimed on the asset; the Investment Allowance is in addition to depreciation.

To claim the Investment Allowance, the business must satisfy the business-purpose test. If the asset being acquired was able to be depreciated under the Taxation Act and was primarily for the business with a minimum of 50% business use, then you are entitled to claim the Investment Allowance. If there is some private use of the asset, which is not an exempt private use item, then the private use should be declared in the business' Fringe Benefits Tax Return.

The Investment Allowance is a tax deduction of 50% of the cost of an eligible depreciable asset. For example, a business which purchases an eligible asset for $23,000 excluding GST, will be entitled to an Investment Allowance tax deduction of $11,500. If the business is trading at a loss, the Investment Allowance is included in the carried forward taxation losses that can be claimed in future income years.

Small businesses with turnovers under $2M can claim the Investment Allowance on items from $1,000 upwards. A business is able to group assets to establish the cost of $1,000, where those assets are part of a set or are substantially identical assets used for the same purpose, (eg set of spanners or a number of computer workstations attached to the same server) and the aggregate cost is $1,000 or more.

If you wish to purchase a luxury car, then the 50% tax deduction is only calculated on the luxury car limit of $57,180, irrespective of the cost of the luxury car.

If your turnover is over $2M, you can claim an Investment Allowance of 30% for expenditure on eligible assets ordered between 13th December 2008 and 30th June 2009, subject to the eligible assets being installed by 31st December 2010. To claim the Investment Allowance for businesses with turnovers in excess of $2M, the minimum expenditure is $10,000. For acquisitions made from 1st July 2009 to 31st December 2009, the Investment Allowance is 10%.

If you would like to discuss any aspect of the operation of the Investment Allowance, please do not hesitate to contact us.

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Please contact our nearest office if you would like more information on this topic.

Bentleys Chartered Accountants and Business Advisors has offices in:

Australian capital cities Sydney, Melbourne, Brisbane, Adelaide, Perth, Canberra

Regional and suburban Dubbo, Gosford, Ipswich, Maroochydore, Newcastle, Tamworth

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