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In December 2008 the federal government announced a 10% temporary
investment allowance in the form of additional tax deductions on depreciable plant
and equipment. The deduction is available for businesses that start to hold or start
to construct an asset between December 13, 2008 and June 30, 2009.
The Rudd government estimates that this measure will cost the Commonwealth
$1.6 billion and is expected to encourage Australian businesses to invest more
heavily in plant and equipment assets.
Plant and equipment assets purchased and owned (settled) by a business within
the qualifying dates will have another 10% added to the total deduction available
in the first financial year. The 10% is worked as 10% of the cost of the eligible
asset.
Some important points:
- The minimum expenditure is $10,000 per asset
- The investment allowance is confined to new assets and new expenditure on existing assets
- Land and trading stock are excluded and do not qualify for the allowance
- Only Division 40 (plant and equipment) items qualify, capital works
(Division 43) do not qualify for the allowance
- Assets must be installed ready for use by June 30, 2010.
Example
John owns XYZ Office Supplies. In January 2009, he decided to install an air
conditioning unit at his premises, costing $30,000. Under normal depreciation
rates, John will be able to claim a $4,000 deduction in the first full financial year.
With the new temporary investment allowance, John will be eligible to receive a
further $3,000 deduction (10% of the cost of the asset), available immediately.
At the time of printing, legislation for this investment allowance was not in place.
However, these deductions are available immediately for qualifying assets.
For further information, contact a tax depreciation specialist at BMT Tax
Depreciation.
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