A business advisory firm has urged small businesses to quickly take advantage of a federal government tax break before the window of opportunity closes.
A business advisory firm has urged small businesses to quickly take advantage of a federal government tax break before the window of opportunity closes.
The federal government is currently pushing through the small and general business tax break draft legislation, which was part of the larger $42 billion stimulus package.
Under the legislation, businesses are able to claim a 30 per cent deduction for new capital investment in new equipment acquired between December 13 2008 and June 20 2009, and installed before June 30 2010.
BDO Kendalls director Russell Garvey said the combination of a June 30 deadline and the increasing amount of time financial institutions are taking to approve and provide finance, meant businesses should move sooner rather than later to take advantage of the temporary scheme's benefits.
"Our advice is to start looking at this early," he said. "That will give the business time to establish the business case for the investment and the business plan for the company.
Mr Garvey said small businesses with an annual turnover of less than $2 million could apply the Tax Break to capital expenditure on items as low as $1000 in value, while other businesses can claim the Tax Break on items worth $10,000 or more.
"If any equipment looks like it will require an upgrade in the next 12 months, now is the most tax effective time to make that upgrade," he said.
The announcement is below:
Substantial tax benefits will be soon be available to businesses contemplating capital expenditure, but companies have only a limited time to take advantage of the new Federal Government measure.
When the Small Business and General Business Tax Break draft legislation is passed in its original or slightly amended form, companies will be able to claim a 30 per cent deduction for new capital investment in new equipment acquired between December 13, 2008 and June 30, 2009, and installed before June 30, 2010.
A 10 per cent deduction will be available for capital equipment acquired by December 31, 2009 and installed before December 31, 2010.
BDO Kendalls Director Russell Garvey said the Tax Break provided opportunities for small and large businesses which were considering capital expenditure.
"The Government is trying to provide a shot of adrenalin into the arm of the Australian economy, and businesses, whether they are large miners or small businesses, should take advantage of it," he said.
"Taxation advantages alone shouldn't drive investment decisions, but if businesses are considering capital expenditure programs, this is a free kick from the Government. It is a genuine bonus from a tax perspective, but once June 30 passes, the taxation advantages diminish considerably, and come December 31 they will be gone."
The most common business investment is in motor vehicles, and motor vehicle purchases are potentially eligible for the Tax Break under the published, draft legislation and guidelines.
Mr Garvey said the combination of a June 30 deadline and the increasing amount of time financial institutions are taking to approve and provide finance, meant businesses should move sooner rather than later to take advantage of the temporary scheme's benefits.
"Our advice is to start looking at this early," he said. "That will give the business time to establish the business case for the investment and the business plan for the company.
"To qualify you will need to have entered into a contract to start to hold the asset or have started to construct the asset within the relevant timelines. So get to the bank early if finance is critical to your investment in order to avoid any rush to their door in June. If you leave it too late, it could mean the difference between 30 per cent and 10 per cent or 10 per cent and nothing."
Mr Garvey said small businesses with an annual turnover of less than $2 million could apply the Tax Break to capital expenditure on items as low as $1000 in value, while other businesses can claim the Tax Break on items worth $10,000 or more.
"If any equipment looks like it will require an upgrade in the next 12 months, now is the most tax effective time to make that upgrade," he said.
Other points to note about the Small Business and General Business Tax Break include that:
-It does not affect business' ability to claim depreciation on the full amount of the asset. The Tax Break will provide a bonus deduction rather than bringing forward normal deductions for an asset's decline in value. This means that, over time a taxpayer could effectively claim deductions of up to 130 per cent of the asset's value;
-It is not applicable to second hand items (unless the asset has never been used or installed ready for use), land, non-tangible assets such as Intellectual Property and computer software, or trading stock;
-It is capped at $57,180 for luxury cars;
-The Tax Break will not be reduced for any non-business use of an asset that is acquired principally for carrying on a business;
-Those of us who claim deductions for motor vehicles under the cents per kilometre method will not be able to secure the new Tax Break for the cost of that vehicle; and
-It can be applied to leased assets if it is a tangible depreciating asset for taxation purposes and you are the person eligible to claim tax depreciation on the item
