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The tax break is law – let’s get cracking

Professional services firm Deloitte has called on businesses to invest in acquiring new or upgrading existing, tangible depreciating assets and get the Australian economy moving following the federal Parliament’s passing of tax laws on Wednesday to assist Australian businesses.

Mark Allan, Deloitte Tax partner, said that while the tax break stimulus initiative has taken too long to become law, business should now get cracking and make further investments in its tangible depreciating assets.

“The draft rules have been around for the past two months and many businesses should have already determined whether or not the tax break stimulus will provide sufficient incentive for them.”

Mr Allan said there are three critical aspects to understand with the tax breaks:

  • a taxpayer must be carrying on a business in order to be eligible to claim a bonus deduction.  In many instances, taxpayers carrying on a business utilise several entities for the purposes of asset protection and segregation of risk. If the entity that makes the investment commitment to acquire or upgrade a tangible depreciating asset is a passive investor with no business (e.g. an entity owns and leases assets to a related entity which carries on a business), taxpayers should be mindful of their eligibility to claim a bonus deduction
  • a business taxpayer can only claim the bonus deduction for the year ending 30 June 2009 provided it has made the investment commitment and has the relevant asset installed and ready for use by 30 June 2009
  • if the business taxpayer is not a ‘small business’, it must make its investment commitment by 30 June 2009 for it to be eligible for the bonus deduction equal to 30% of relevant expenditure in 2009 or 2010”.

The introduction of the 50% tax break for small business and extension of the investment commitment time to 31 December 2009 are certainly welcome inclusions. However, any small business taxpayers that have associated entities should ascertain as soon as possible whether they can be regarded as a ‘small business’.

“The ramifications are huge if they get this wrong” said Mr Allan.

“If a taxpayer feels the pressure is now off because they regard themselves as a small business and they will otherwise not make an investment commitment until sometime between 1 July 2009 and 31 December 2009, they will have egg on their face because there will be no effective fall back as the 30% tax break for non small business taxpayers will not be available to them.”

“If, however, the taxpayer is not regarded as a small business, it must get cracking and make an investment commitment by no later than 30 June 2009.”

Last Updated: 

Contacts

Name:
Jane Kneebone
Company:
Deloitte Australia
Job Title:
Corporate Affairs & Communications
Phone:
Tel: +61 3 9671 7389, Mobile: +61 4 1614 8845
Email
jakneebone@deloitte.com.au
Name:
Mark Allan
Company:
Deloitte Australia
Job Title:
Partner, Deloitte Private
Phone:
Tel: +61 3 9671 7811, Mobile: +61 (0) 400 600 286
Email
markallan@deloitte.com.au

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