Update on the Investment Allowance

Dated: April 2009

The rules surrounding the Investment Allowance have changed again. Currently, there is an opportunity to claim either a 30% deduction or a 10% deduction. The rate that applies depends on when the investment is made and when the purchase is installed, as outlined in the following table.
NEW INVESTMENT BY:
30 June 2009
1 July 2009
– 31 December 2009
INSTALLED BY:
30 June 2009
30% in 2008-09
30 June 2010
30% in 2009-10
10% in 2009-10
31 December 2010
10% in 2010-11
10% in 2010-11

Only certain assets are eligible. Some examples are:

ELIGIBLE
NOT ELIGIBLE

* Tangible, depreciating assets for which a deduction is available under section 40-25 of the ITAA97 such as:
- machinery
- equipment
- cars-except those using the "cents per kilometre" method

 * Intangible assets, such as:
- computer software
- intellectual property rights

* Tangible, depreciating assets used by small business entities

 * Land

* Tangible, depreciating assets used in R & D

 * Primary Production assets depreciated under subdivisions 40-F or 40-G of the ITAA97, which includes water facilities (eg tanks), horticultural plants, landcare operations, electricity connection and telephone lines
  * Trading stock
  * Capital works – buildings, construction expenditure
  * Cars using the "cents per kilometre" method

Recent changes have also clarified the following:

- Cars that are demonstrator vehicles, which are often used by the dealer to drive to and from work will not be eligible as they are not ‘new’.

- If you buy a number of identical or substantially identical items they can be added together to determine if you can claim the allowance (eg 10 fridges)

- Items that are a set may similarly be added together to determine if you can claim the allowance. Items are a set if they are dependent on each other, marketed as a set, or designed and intended to be used together (eg a base station CB radio and a handheld CB radio are a set because they are designed to work together)

- The asset must be principally used by a business in Australia - this means the asset can be overseas when it is bought, but at the time it is purchased it must be reasonable to conclude it will come to Australia and be used for business purposes here.

Although the fundamentals appear to be established, there may be further changes until it finally becomes law.

Note: It is NOT a rebate, and you will NOT receive a cheque from the Government. It is simply an extra tax deduction you claim when doing your tax return for the year.
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