Small business operators were big winners in the Federal budget announced 12 May. The proposed Investment Allowance* has now been increased to 50% for businesses with a turnover of less than $2 Million annually. Importantly the deadline to take advantage of the allowance has been extended by 6 months.
The best news is how much money small businesses can save. The 50% Investment Allowance* means a one-off tax deduction equal to an additional 50% of the capital cost on eligible new or demonstrator equipment and motor vehicles costing as little as $1,000 or more. They must be ordered by 31 Dec 2009, then delivered and installed by 31 December 2010, again a 6 month extension on the previous deadline. Major rebuilds and upgrades are also included.
As Mark O'Donoghue, principal of finance broker Finlease comments, "This is a once in a lifetime opportunity, a massive 50% extra tax deduction with the luxury of an 8 month window in which to act. By December 2010 we would expect the economy to be rebounding, leaving the better positioned small businesses ready to capture the profit impetus as a result of the upswing."
How much could you save? As an example, on a piece of equipment worth $100,000 you could receive a tax deduction of $50,000 additional to the $15,000 depreciation allowance you can already claim. That adds up to a huge $65,000 tax deduction in the first year.
Since small business is the lifeblood of the country, so this government initiative will amount to a big boost with far reaching impact. Larger businesses aren't being left out with the current 30% Investment Allowance* left unchanged, including the 30 June 2009 deadline to order or make purchase decisions.
Naturally you must do your own research or speak with your own advisers to find out the best course of action given your current business situation.
However, various scenarios prepared by Finlease for various clients revealed that the tax savings could add up to many thousands of dollars.
Right now, interest rates are at 50 year lows and still falling, while new equipment and motor vehicles are being sold at bargain prices. So this stimulus means that now could be an opportune time for you to upgrade.
Given the urgency of making some hard decisions and finalising orders, it may also be worthwhile speaking with a specialist business finance broker to accelerate the finance process. Companies like Finlease specialise in the needs of small to medium business and can help you secure the finance and meet the Investment Allowance* deadline. So talk to your accountant or Finlease, or see the details as laid out in the budget at: http://www.aph.gov.au/budget/2009-10/content/overview/html/overview_09.htm .
* Currently before the Senate
This is general information and does not take into account your specific circumstances. You should seek confirmation from your accountant.