NEW Investment Allowance
The Federal Treasurer has announced a $2.7 billion Business Tax Break as a key element of the Government's $42 billion stimulus package.
Everyone knows that to stay on top in business you have to have the right equipment and this new capital investment allowance presents Australian manufacturers with an opportunity to invest in the latest technology, get an edge on the competition and to receive an additional tax deduction for doing so.
To maximise the benefit of the allowance a capital equipment purchase order should be in place by 30 June 2009 for delivery before 30 June 2010 and you are then eligable to claim a tax deduction equal to 30% of the cost in addition to the usual depreciation allowance.
What does this mean in year one:
|
|
Assume an equipment purchase price |
$150,000 |
Assume business net profit for the year |
$200,000 |
New Capital Investment Allowance @ 30% |
$45,000 |
Small Business Depreciation @ 15% |
$22,500 |
Total first year deduction |
$67,500 |
In the above example the deduction reduces net profit from $200,000 to $132,500 which represents a tax saving of $20,250 in year one.