Investment Allowance tax breaks passed

The eagerly awaited Investment Allowance packages have at last passed through both houses of Parliament.

The eagerly awaited Investment Allowance packages have at last passed through both houses of Parliament.

These 30% and 50% Investment Allowances mean businesses will receive significant savings as they seek to boost their productivity by adopting more advanced equipment and vehicles.

Businesses with a turnover of $2m or less qualify for the 50% Investment Allowance. Larger businesses with a turnover exceeding $2m can qualify for the 30% Investment Allowance, though they will need to act promptly to meet the June 30 deadline.

Both Investment Allowances apply to purchases of new and demonstrator vehicles and equipment, along with major rebuilds and upgrades of existing equipment. What’s more, they are in addition to the standard depreciation claimed for such assets.

Whilst the window of opportunity is limited, the potential savings are substantial.

As Mark O’Donoghue of finance broker Finlease commented, “There hasn’t been anything like this for over 20 years, so this truly is a once in a lifetime opportunity.

“When you consider these measures have come at a time when interest rates are at 50 year lows, we believe they will provide significant stimulus to business at a critical time.”

The 30% Investment Allowance applies to vehicles and equipment costing $10,000 and more.

They must be acquired or ordered between 13th December 2008 and 30th June 2009, then installed and ready for use by 30th June 2010. Businesses turning over $2million or less per annum have more time and will receive more savings.

For the 50% Investment Allowance, vehicles and equipment must be $1,000 or more, ordered or purchased before 31 December 2009, then installed and ready for use by 31 December 2010.

Naturally individual companies need to do their own research to determine what benefits can be gained given their current situation. However, various scenarios prepared by Finlease for various clients revealed that the tax savings could add up to many thousands of dollars.

While the tax savings will make life easier, recent indicators suggest that securing the funds may be rather more difficult.

The latest research shows that smaller businesses are becoming increasing dissatisfied with their banks, a sentiment which is in contrast with mid sized corporations which are quite happy with their banks. This may be evidence that major banks have shifted their focus away from smaller businesses at a time when the government has actually increased support through the 50% Investment Allowance.

Given this new data along with the recent tightening in credit markets, smaller businesses may benefit through enlisting the services of specialist business finance brokers like Finlease.

For more detailed information contact Finlease at sian@Finlease.com.au to receive the Government overview documents with full details.

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