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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.

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.

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.

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.

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!

Obviously – making a commitment like the 30% Small Business and General Business Tax Break has a significant impact on the Federal Government’s bottom line.

But how much of an impact will it have?

In the explanatory memorandum for the Tax Laws Amendment (Small Business and General Business Tax Break) Bill 2009, the Government clearly articulates the impact it thinks the bill will have over the next couple of years.

Financial Impact:  The amendments are estimated to have a total cost to Budget of $3.8 billion for 2009-10 to 2011-12

Further to this “big number” – they do provide a breakdown of the impact to tax revenue between now and the 2011-12 year

2007-08:  Nil

2008-09: Nil

2009-10: -$1,440m

2010-11: -$1,800m

2011-12: -$515m

It should be noted that this isn’t just the cost of the 30% Investment tax break that will be in place between 13 December 2008 and 30 June 2009, but also the reduced 10% Investment tax break that will be in play from 1 July 2009 through until 31 December 2009.

If you have read anything about the Federal Government’s proposed 30% investment tax break – I am sure you would know that there are two “tiers” under which your business could qualify for the tax break.  Depending on the size of your business, this could have a significant impact on what your business could claim under the tax break.

To find out if your business qualifies for the 30% tax break, lets take a look at what has been said in parliament.  As mentioned by the Treasurer – Wayne Swan – when he introduced the Tax Laws Amendment (Small Business and General Business Tax Break) Bill 2009 into the House of Representatives…

Small business entities need to invest a minimum of $1,000 to qualify for the tax break.  All other businesses need to invest a minimum of $10,000

Which begs the next question… what is the definition of “Small Business”.  The good news is that this is defined in the Explanatory Memorandum of the bill.

In section 1.76…

A taxpayer is a small business entity for an income year, rather than at a point in time.  Section 328-110 provides that a taxpayer is a small business entity for the current income year if they:

• carried on a business during the previous year and their aggregated turnover for that year was less than $2 million; and
• expect their aggregated turnover to be less than $2 million again in the current income year

To read more about the difference between a small business and a general business under the Small Business and General Business Tax Break – make sure you read through the Explanatory Memorandum

On 19 March 2009, the Federal Government introduced the Tax Laws Amendment (Small Business and General Business Tax Break) Bill 2009 into the House of Representatives.

The Treasurer – Wayne Swan – commenced the second reading of the bill.  As recorded in Hansard…

I move:  That this bill be now read a second time.  This bill introduces the small business and general business tax break – a key part of the government’s Nation Building and Jobs Plan. 

The $3.8 billion tax break will help boost business investment, bolster economic activity and support Australian jobs.

The tax break is targeted towards encouraging and sustaining business investment in the face of a global recession

You can read Mr Swan’s entire speech from the second reading of the bill at the ParlInfo site.

Hi there, and welcome to 30percent.com.au

As many Australian business owners would know, on the 3rd of February 2009, the Prime Minister of Australia - Kevin Rudd, announced a raft of measures to stimulate Australia’s economy. 

One of the measures that made up the stimulus package that Kevin Rudd announced on behalf of the federal government was the Small Business and General Business Tax break.

To quote the Prime Minister’s media release…

To support jobs and Australian businesses – especially small businesses – the Government will fund an investment tax break for all Australian businesses.  This temporary business tax break will help Australian businesses boost business investment, bolster economic activity and support Australian jobs.

This website – 30percent.com.au – is dedicated to covering news, resources and promotions focused on the 30% Investment Tax Break.

Want to keep up to date on the 30% Investment Tax Break?

Make sure you subscribe to our email updates – each week between now and the 30th of June (when the 30 Percent Tax Break expires) we will send regular updates to ensure you have the right information to make the right decisions – and make the most out of this $2.7 billion tax break the Government is giving Australian businesses.