Temporary Investment Allowance Tax Breaks Explained

Please note: The Temporary Investment Allowance is no longer available for asset purchases made after 31 December 2009. This information is provided for reference purposes only.

Additional tax breaks for your business

The Federal Government's Temporary Investment Allowance for general business and small business - also known as the Small Business and General Business Tax Break - is a temporary additional tax deduction available to businesses when they purchase eligible new assets, or invest new funds in existing assets. This one-off deduction is in addition to the normal depreciation deductions that businesses can claim.

The Temporary Investment Allowance ends on 31 December, 2009. In order to take advantage of this unique opportunity, businesses must commit to investing before this date, and the asset(s) must then be used, or installed ready for use, by the end of 2010.

Please note that the information on this page is of a general nature only and is not intended as advice. You should consult a registered tax agent to obtain information and advice specific to your situation before making any decisions involving the Temporary Investment Allowance.

What is the Temporary Investment Allowance?

The Temporary Investment Allowance was first announced in December 2008 as part of the Federal Government's economic stimulus package. It is an additional, one-off tax deduction available to businesses for the purchase of new (and demonstrator) assets, as a means of encouraging business investment.

These assets must meet minimum investment value thresholds and investment deadlines to qualify for a deduction, with the deductions available depending on the size of the business (as defined by annual turnover) and the timing of the investment. In order to be eligible for any part of the Temporary Investment Allowance tax breaks, investment commitments or purchases must be made no later than 31 December 2009.

The Temporary Investment Allowance is an additional tax deduction, over and above the normal depreciation a business may claim over the life of an asset. This means that the total tax deductions over the life of assets eligible for the Temporary Investment Allowance will be greater than 100% of the value of the asset.

Eligible assets & minimum investments

New, tangible, depreciating assets on which a business would usually claim depreciation are eligible for the Temporary Investment Allowance, as long as they meet the minimum investment value thresholds.

Examples of eligible assets include new and demonstrator vehicles (cars, trucks, etc), plant, business equipment, machinery and computer hardware (but not software).

The minimum investment value threshold for small businesses (less than $2 million annual turnover) is $1,000 excluding GST. For other businesses (annual turnover of $2 million or more) the minimum investment value threshold is $10,000 excluding GST. This threshold is per item, although the values of groups of items that are related, or form a set, may be counted together.

Deduction amounts & deadlines

The size of the deduction your business is eligible for and the deadline for making an eligible asset investment depends on the size of your business.

The maximum deduction of 50 per cent is available to small businesses with less than $2 million annual turnover. Investments in eligible assets, or contracts to purchase or construct these assets, must be made between 13 December 2008 and 31 December 2009. Importantly, these assets must also be installed and ready for use by 31 December 2010.

A 30 per cent deduction is available to other businesses (annual turnover of $2 million or greater) that have invested in eligible assets, or entered into a contract to purchase or construct eligible assets, between 13 December 2008 and 30 June 2009. These assets must be installed and ready for use by 30 June 2010.

Finally, a 10 per cent deduction is available to other businesses (annual turnover of $2 million or greater) that have invested in eligible assets, or entered into a contract to purchase or construct eligible assets, between 1 July 2009 and 31 December 2009. These assets must be installed and ready for use by 31 December 2010.

Claiming the additional tax deductions

The Temporary Investment Allowance additional tax deductions can generally be claimed on your business's income tax return for the income tax year that the eligible asset(s) were installed and ready for use.

Small business essentials

A summary of the additional tax deductions available for small businesses (less than $2 million annual turnover):

  • Additional 50 per cent tax deduction available.
  • Eligible assets must be new (including demonstrator), tangible and depreciating.
  • Commitment to invest must be made between 13 December 2008 and 31 December 2009.
  • Eligible assets must cost $1,000 (excluding GST) or more.
  • Eligible assets must be installed and ready for use by 31 December 2010.

Small business essentials

A summary of the additional tax deductions available for small businesses (less than $2 million annual turnover):

  • Additional 50 per cent tax deduction available.
  • Eligible assets must be new (including demonstrator), tangible and depreciating.
  • Commitment to invest must be made between 13 December 2008 and 31 December 2009.
  • Eligible assets must cost $1,000 (excluding GST) or more.
  • Eligible assets must be installed and ready for use by 31 December 2010.

Other business essentials

A summary of the additional tax deductions available for other businesses (annual turnover of $2 million or more):

Phase 1 - ends 30 June 2009:

  • Additional 30 per cent tax deduction available.
  • Eligible assets must be new (including demonstrator), tangible and depreciating.
  • Commitment to invest must be made between 13 December 2008 and 30 June 2009.
  • Eligible assets must cost $10,000 (excluding GST) or more.
  • Eligible assets must be installed and ready for use by 30 June 2010.

Phase 2 - ends 31 December 2009:

  • Additional 30 per cent tax deduction available.
  • Eligible assets must be new (including demonstrator), tangible and depreciating.
  • Commitment to invest must be made between 1 July 2009 and 31 December 2009.
  • Eligible assets must cost $10,000 (excluding GST) or more.
  • Eligible assets must be installed and ready for use by 31 December 2010.

Choose your finance carefully

Choosing finance to conserve your cashflow and obtain the vehicles and equipment you need to grow your business needn't be difficult with the right advice. When it comes to the Temporary Investment Allowance, the finance structure you use can determine your eligibility for the additional tax deduction, as well as influencing the required timing of payments and delivery - so you need to choose your finance carefully.

stratton's experienced finance consultants will ask the right questions before they give you the answers - helping you to select the best structure and the best lender for your needs.

Keep your cash, expand your business with new cars and equipment, and take advantage of the additional tax deductions available on purchases made before 31 December 2009: call us on 1300 738 290, or enquire online about car finance or business equipment finance now.