Investment Allowance – What does it mean to my business?

The Small Business and General Business Tax Break legislation has received Royal Assent and is now law.  This means if you are a small or large business, if you buy a vehicle primarily for business purposes you could receive a significant tax saving.

The tax break is in two bands. The first which is ending shortly, June 30, is for larger businesses with a turnover of $2 million or more. It may entitle the business to an additional tax deduction of 30% of the cost of a new tangible assets (such as a vehicle), but it must buy the asset between 13 December 2008 and June 30 2009.  After June 30, 2009 the tax break changes from 30% to 10%. The asset much also be used on or before 30 June 2010.

The second band is for smaller businesses, having a turnover of $2 million dollars or less. There are a couple of differences for the small businesses – firstly the additional tax deduction is 50% not 30% and you have a bit longer. The asset must be bought between 13 December 2008 and 31 December 2009. The asset must first be used before 31 December 2010.

For example if you were looking at buying a new Mitsubishi Triton Ute for your small business at $24,990 with the tax break you could claim an additional tax deduction of $12,495. Could make the choice of upgrading to a new car this year a no-brainer!

For more information see the Treasurer’s joint Media Release No. 061 with the Minister for Small Business Independent Contractors and the Service Economy of 12 May 2009 which announces the Small Business Tax Break Boost.

This is intended as a guide only and does not constitute real advice. Please consult your tax advisor for complete information.