The Rudd Government has proposed a temporary business tax break as part of the $42 billion Nation Building and Jobs Plan, announced on 03rd February.
The Small Business and General Business Tax Break is in effect an extension of the Investment Allowance announced at the end of 2008, aimed at boosting business investment. Many property owners, developers and investors may be able to take advantage of this additional tax relief.
The tax break works as follows:
Businesses will be able to claim an additional tax deduction of 30% for eligible assets costing a minimum of $10,000, that are acquired or for which a contract to acquire is entered into between 13 December 2008 and 30 June 2009; and the asset is ready for use by 30 June 2010.
Businesses will also be able to claim a deduction of 10% for the same class of assets acquired between 01 July 2009 and 31 December 2009, as long as the asset is ready for use by the end of December 2010.
For small businesses, those with at turnover of $2 million or less, the same time scales and deductions apply, but the minimum asset cost threshold is reduced to $1,000.
The tax deduction will apply to those tangible assets used for business purposes, for which a deduction is available under the provisions of Division 40 (Capital Allowances) of the Income Tax Assessment Act 1997 (ITAA 1997). The deduction is claimable in the income year in which the asset is installed ready for use.
For example:
A commercial building owner undertakes an upgrade and refurbishment to the air-conditioning system of a CBD office development, which includes the installation of a new absorption chiller, costing $300,000. The contract for the refurbishment works commences during April 2009 and completes and is ready for use during August 2009.
The building owner will be entitled to claim an additional deduction for the chiller, being 30% of the assets first element of cost under Subdivision 40-C of the ITAA 1997, i.e. $90,000 in addition to the usual depreciation deduction for such an asset, which in this example would be $12,000 using the prime cost method.
Rider Levett Bucknall has for many years assisted clients in ensuring they take full advantage of all property tax allowances eligible to them, and this will extend to full consideration of this new tax break.
Please contact your local RLB office for further details.