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On the 14th of May, the Tax Laws Amendment (Small Business and General Business Tax Break) Bill was passed by the Senate.

Whilst this does not make it law just yet – we still need to have the Royal Assent – it basically means that what is in the legislation will not change between now and when it does become law. 

You can read the legislation as passed by both houses of the Australian parliament on the Parlinfo website.

What does this mean?

If you are a general business with annual revenue greater than $2 Million – you have until 30 June 2009 to take advantage of the 30 percent investment tax break.

If your are a small business with annual revenue less than $2 Million – you have until 31 December 2009 to take advantage of the 50 percent investment tax break.

We are now set up and ready to go over at 50percent.com.au – which will focus specifically on the 50% Investment Tax Break for Small Businesses.

So if you have annual revenue less than $2 Million – and are looking to purchase eligible assets over $1000 before the end of this year… make sure you check it out.

For those of you following the Federal Budget tonight… especially those of you who have annual revenue below $2 Million… there is some great news.

The Treasurer put it nicely in his budget speech tonight:

Mr Speaker, small businesses are the backbone of the Australian economy, employing around half of all private sector workers.

That is why the Government will also provide immediate additional assistance by increasing the Small Business and General Business Tax Break to 50 percent for eligible assets ordered between December 2008 and December 2009, in addition to assistance for small businesses to take advantage of e-business opportunities.

We are currently digging deeper through the budget papers to find any more detail about the change (and if it just applies to Small Business, or as you could interpret from the speech – all businesses).  Keep reading, or subscribe to the newsletter below for regular updates.

UPDATE:  More detail found in Budget Paper No. 1

Looks like the change is just for small businesses, and NOT General Businesses who will continue to be able to take advantage of a 30% investment tax break.

As mentioned in Budget Paper No. 1:

The bonus tax deduction under the Small Business and General Business Tax Break will be increased to 50 per cent for small businesses.  This will further help them to invest, bolster economic activity and support  Australian jobs.  The tax deduction is available for eligible assets costing $1000 or more acquired between 13 December 2008 and 31 December 2009 and installed and ready for use before 31 December 2010.  The expansion will have an estimated cost to revenue of $141 million.

UPDATE:  More detail found in Budget Paper No. 2

The wild goose chase continues for detail on the announcement tonight

In Budget Paper No. 2, there is more information on changes to the Small Business and General Business Tax Break.

The Government will expand the Small Business and General Business Tax Break announced in the February 2009 Updated Economic and Fiscal Outlook to provide additional assistance to small businesses.  A bonus deduction of 50 per cent will be available to small businesses that acquire an eligible asset between 13 December 2008 and 31 December 2009 and install it ready for use by 31 December 2010.  The previously announced 30 percent and 10 percent bonuses will continue to apply to all other businesses.  This expansion will have an estimated cost to  revenue of $141 million over the forward estimates period.

Also in the same section of Budget Paper No. 2, the Government outlines some of the enhancements the are going to make to the original Small Business and General Business Tax Break…

The Government has also enhanced the Tax Break for all businesses since it was announced on 3 February 2009.  A taxpayer can now aggregate their investment in assets that are substantially identical, or that form a set, to meet the threshold.  Where assets are jointly held, a taxpayer can recognise all other business interests in the asset for the purpose of meeting the threshold, but will only be able to claim the Tax Break on their interest in the asset.  Where a taxpayer has met the investment threshold for an asset, they can claim additional investment in the assets as part of the Tax Break.  These enhancements have an unquantifiable but small revenue impact.

You can read more about this, and other budget items that might impact your life (like the extension of the first home owners grant) on the budget.gov.au site.

We are also bootstrapping 50percent.com.au to focus on this increased tax break – it will be live in the next few hours.

If you have been following the Australian Federal Government’s proposed 30% investment tax break… you will be more than aware of the fact that is it still just that… proposed!

And after what we saw happen with the “Alcopops” tax earlier this year, why would any serious business take advantage of a tax break that may not eventuate?

On the Sydney Morning Herald’s “My Small Business” site, Max Newnham posted an article which captures that exact sentiment, and dives a little deeper.

Here are a few of the key quotes from the article – first from the dealer principal of Yarra Valley Motor Group:

… 30 percent of our business customers are delaying the purchase of new commercial vehicles due to the uncertainty surrounding the investment allowance.

If that didn’t drive it home strong enough, this quote from the CEO of Network Help certainly will:

“Eight out of 10 companies we have submitted proposals to (are) delaying the upgrading of computer systems due to the uncertainty of whether the investment allowance will pass”

So what can we do about it?

Not much really until our friends in Canberra get back to work next week and start moving the bill through the house and across to the senate.  Being budget night on May 12, you would think that the Government would take advantage of that timing and accelerate the bill through parliament.. but who knows!

Best bet?  Keep checking back at 30percent.com.au for the latest news on the passage of the bill.

Are you an Australian Manufacturer trying to understand the impact of the Federal Government’s 30% Investment Allowance?

According to the organisers of National Manufacturing Week (which is actually next week – 12-15 May - in Melbourne!)…

… businesses such as manufacturers, fabricators, workshops, warehouses and many others will be able to claim a bonus deduction of 30% for eligible assets – including manufacturing, processing, electronic, IT and other capital equipment…

As published in Manufacturers’ Monthly, the organisers of NMW also illustrate a great example of what the allowance actually means for manufacturers

… under the 30% business tax break, a piece of fabricating equipment costing $100,000 will be eligible to claim a deduction of 30% of that $100,000 – or $30,000.  At the standard company tax rate of 30%, that would equate to a reduction in tax for the 2008-09 financial year of $9000

The thing to remember is that if you are a manufacturer who is interested in taking advantage of the tax break – you need to make your investment in eligible assets prior to 30 June 2009, and have the equipment installed and ready to go by 30 June 2010.  The financial year you can claim the deduction in may vary depending on your investment – so make sure our article on when you can claim your tax break.

If you have any questions – best bet is to take this information and talk to your accounting team.

Over at POS Solutions Australia, there have been a number of posts on the impact of the Federal Government’s Thirty Percent tax break on small business retailers.

They use a great example which drives home exactly what the tax break could mean to your small business…

… say a small newsagent purchased today $1,200 worth of computer equipment.

… they can claim $400 on top of the $1,200 they can already claim

You can read more about their take on the 30% tax break on their blog.  And from this post, it looks like business is very strong, thanks to the investment allowance.

Desktop and Laptop computer manufacturer and retailer Dell have put together a great article on what the investment allowance means to small businesses looking to purchase a desktop, laptop or server before 30 June.

As Dell mention in the article…

This great new initiative means a small business owner who buys a $2,000 personal computer during this time will be able to claim an additional $600 tax deduction for the computer in the 2008/2009 tax year.  It’s important to remember this allowance will be in addition to the normal capital allowance deduction the business owner would make for the computer.

…

All these new incentives mean it’s a great time to consider replacing old and outdated technology and equipment in your business.

You can find the “Great New Tax Breaks for Small Business: Take The Opportunity To Upgrade Your System Now!” article on Dell’s Business Ownership site.

So you have purchased an eligible asset for the Australian’ Federal Government’s Investment Tax Break.  The next question for your Accountant is…

When can you claim your deduction?

In Division 41 (41-115, 41-120, 41-125, 41-130 and 41-135) of the exposure draft of the legislation it is put in very complicated language… but for the rest of us this quote from Federal MP Craig Emerson (the Federal Member for Rankin and Minister for Small Business, Independent Contractors and the Service Economy) basically sums it up:

“The deduction is claimable in the income year that the asset is installed and ready for use”

Assuming your acquire (or start construction of) the eligible asset between 13 December 2008 and 30 June 2009 (so you qualify for the thirty percent tax break):

• If the asset is installed and ready for use by 30 June 2009, the 30% deduction is claimable in the 2008-09 income year
• If the asset is installed and ready for use by 30 June 2010, the 30% deduction is claimable in the 2009-10 income year
• If the asset is installed and ready for use after 30 June 2010 – you no longer qualify for the 30% investment tax break.

If you acquire (or start construction of) the eligible asset between 1 July 2009 and 31 December 2009 (so you qualify for the ten percent tax break):

• If the asset is installed and ready for use by 30 June 2010, the 10% deduction is claimable in the 2009-2010 income year.
• If the asset is installed and ready for use by 31 December 2010, the 10% deduction is claimable in the 2010-2011 income year. 

*Remember that the legislation still hasn’t passed parliament when this article was published – so don’t just take our word for it!  Make sure you speak to your accountant before making any decisions.

Are you a business who would like to target Australian businesses looking take advantage of the Federal Government’s 30% Investment Tax Break?

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Generally there are a number of criteria your asset needs to meet to be eligible for the Tax Break:

• The asset needs to be new – not second hand
• You need to buy the asset between 13 December 2009 and 30 June 2009 (for the 30% tax break) or between 1 July 2009 and 31 December 2009 (for the 10% tax break)
• The asset needs to be a tangible depreciating asset
• The new investment needs to be greater than $1 000 ex GST for Small Businesses (Rev < $2mil), or greater than $10 000 ex GST for General Businesses, for each asset (or set of identical assets – review section 1.19 of the explanatory memorandum for more info)
• The asset needs to be used principally in Australia

… and obviously – if you don’t pay tax in the first place, you can’t claim a tax break!

If you want to get into the nitty gritty legalese – check out sections 1.11 though to 1.21 in the Explanatory Memorandum of the Tax Laws Amendment (Small Business and General Business Tax Break) Bill 2009.  Note that there are a few exceptions – especially when looking at Cars – so make sure you talk to your accountant!