Big boost for small business

To help Australian industry make some headway through difficult times, the federal government has just announced an Investment Allowance package. This will mean considerable cost savings for businesses right across the board in the form of significant tax incentives.

The allowance gives businesses a one-off tax deduction equal to 30% of the capital cost of eligible new equipment and motor vehicles costing $10,000 or more. This could mean general equipment, computers, company cars and more. What’s more, the new allowance is in addition to the standard depreciation claimed for such assets.

“When you consider these measures have come at a time of falling interest rates, they are likely to have a profound effect on the bottom line of a number of businesses,” explained Mark O’Donoghue, principal of finance broker Finlease. O’Donoghue is acutely aware of the pressures facing his clients who are typically small to medium-sized businesses and believes these new stimulus measures will have a significant impact as the tax savings can add up to many thousands of dollars.

Right now, interest rates are at 40-year lows and still falling, while new equipment and motor vehicles are being sold at bargain prices. So this stimulus means that now is an opportune time to upgrade.

The $2.7 billion Business Tax Break is a key element of the Australian government’s $42 billion Nation Building and Jobs Plan to support up to 90,000 Australian jobs.

This temporary business tax break is especially intended to assist small businesses to bolster economic activity and support jobs, for example:

• A small business that buys and installs a $2000 computer before the end of June 2009 can claim an additional $600 deduction in its 2008–09 tax return.
• A business that buys and takes possession of a $60,000 filling machine by the end of June 2009 can claim an additional $18,000 deduction in its 2008–09 tax return.

Small businesses can claim an additional 30% tax deduction for eligible assets costing $1000 or more that they acquire from 13 December 2008 to 30 June 2009, and install by 30 June 2010.

For eligible assets costing $1000 or more that they acquire from 1 July 2009 to 31 December 2009, they can claim an additional 10% deduction where they are installed by 31 December 2010.

To benefit from this tax break a small business must have a turnover of $2 million a year or less.

Other businesses can receive the same deductions for eligible assets greater than $10,000.

This will further boost business investment and confidence in the Australian economy in the face of the global recession.

Assets eligible for the allowance are new tangible depreciating assets and new expenditure on existing assets used in carrying on a business for which a deduction is available under the core provisions of Division 40 (Capital Allowances) in the Income Tax Assessment Act 1997.

Given the urgency of finalising equipment or vehicle purchases in time, many business owners may find securing the funds to be somewhat challenging in this tight credit market. This is where enlisting the services of specialist brokers like Finlease can be invaluable. They can access a range of leading institutions to secure the funds you need in time. A broker can visit you on site or in your office, and will handle everything from your application to settlement and actively manage the whole process.