Small businesses are being encouraged to take advantage of the Government’s 30 percent Investment Allowance before the June 30 deadline. Finance Broker at Finlease, Mark O’Donoghue explains what the Investment Allowance means for small business, who is eligible and what businesses can expect to receive.
In order to be eligible to receive the 30 percent Investment Allowance, orders need to be placed before 30 June 2009. However, delivery and installation does not need to happen until 30 June 2010. This gives businesses limited flexibility to qualify for the one-off tax deduction equal to an additional 30 percent of the capital cost on eligible new / demonstrator equipment and motor vehicles costing $1,000 or more (as long the company turnover is less than $2 million. If turnover is more than $2 million the minimum per item spend threshold is $10,000).
Smart business operators have already invested significant time and energy into the planning & preparation of orders to secure the 30 percent Investment Allowance for their business. Business owners who leave things to the last minute run the very real risk of missing out on this once in a twenty year cash handout from the Federal Government.
So how much could you save? As an example, on a motor vehicle worth $50,000 on a 5 year chattel mortgage, you’d receive the investment allowance as an extra tax deduction of $15,000. This is in additional to the normal depreciation you can already claim. And as the Investment Allowance is in addition to standard depreciation claimed, the business has the ability to claim a 130 percent deduction over the effective life of the asset.
Naturally you must do your own research or speak with your own advisers to find out the best course of action given your current business situation. However, various scenarios prepared by Finlease for various clients revealed that the tax savings have added up to many thousands of dollars.
There is a triple whammy here because right now, interest rates are at 40 year lows and still falling, also new equipment and motor vehicles are being sold at bargain prices. So this stimulus means that now could be an opportune time for you to upgrade.
Given the urgency and the short window of opportunity now is the time to act and finalise your orders. You should speak with a specialist finance broker. Log onto the Australian Tax Office website for more information.
BASELINE DISCLAIMER: This is general information and does not take into account your specific circumstances. You should seek confirmation from your accountant.
People who read this, also liked:
Investment allowance trap for new car buyers
Small business to benefit from Government Investment Allowance