Legislation passed by the Federal Government in February could mean a 30 per cent tax break for investments in optometric and ophthalmic equipment purchased before 30 June, 2009 and delivered before 30 June, 2010.
In announcing this initiative, the Office of the Prime Minister and the Minister for Small Business said in a media release: “To support jobs and Australian businesses – especially small businesses, the Government will fund an investment tax break for all Australian businesses.”
This means if your practice turns over less than AUD$2 million, you could claim the new 30 per cent investment allowance on purchases of AUD$1,000 or more.
The media release goes on to say: “This temporary business tax break will help Australian businesses boost business investment, bolster economic activity and support Australian jobs.
“Businesses in Australia – especially small businesses, are the engine of the Australian economy and deserve direct support during a global recession. This AUD$2.7 billion Business Tax Break is a key element of the Government’s AUD$42 billion Nation Building and Jobs Plan to support up to 90,000 Australian jobs.”
The Small Business and General Business Tax Break will mean a small business that buys and installs a AUD$2,000 computer before the end of June 2009 can claim an additional AUD$600 deduction in its 2008-09 tax return. Small businesses can claim an additional 30 per cent tax deduction for eligible assets costing AUD$1,000 or more that they acquire from 13 December 2008 to 30 June 2009, and install by 30 June 2010. For eligible assets costing AUD$1,000 or more that they acquire from 1 July 2009 to 31 December 2009, they can claim an additional 10 per cent deduction where they are installed by 31 December 2010. To benefit from this tax break a small business must have a turnover of AUD$2 million a year or less.
Other businesses can receive the same deductions for eligible assets greater than AUD$10,000. Assets eligible for the allowance are new tangible depreciating assets and new expenditure on existing assets used in carrying on a business for which a deduction is available under the core provisions of Division 40 (Capital Allowances) in the Income Tax Assessment Act 1997.
Small businesses will be able to claim a bonus deduction of 30 per cent for eligible assets costing AUD$1,000 or more that they:
- acquire or start to hold under a contract entered into between 12:01am AEDT 13 December 2008 and the end of June 2009, or start to construct between these times; and
- have installed ready for use by the end of June 2010. Small businesses will be able to claim a bonus deduction of 10 per cent for eligible assets costing AUD$1,000 or more that they:
- acquire or start to hold under a contract entered into between 1 July 2009 and the end of December 2009, or start to construct between these times; and
- have installed ready for use by the end of December 2010.
- minimum expenditure threshold of AUD$10,000 will still apply to all other businesses.
The Government has said:
“The tax bonus will apply to tangible assets used in carrying on a business, for which a deduction is available under the core provisions of Division 40 (Capital Allowances) of the Income Tax Assessment Act 1997 (ITAA 1997). Specifically, the deduction will be available for depreciating assets under section 40-30 that qualify for capital allowances under Subdivision 40-B, except for intangibles and rights that would otherwise be included by subsections 40-30(2), (5) and (6).
“However, cars will not be disqualified from the allowance merely because they use the 12 per cent method. Land and trading stock are excluded from the definition of depreciating assets, and will not qualify for the deduction. Expenditures above the threshold, which are capitalised into an existing asset as a second element of cost will also qualify for the deduction.”
Claiming the Tax Bonus
The deduction will be available to the taxpayer who is entitled to the capital allowance deduction under Division 40 of ITAA97 in respect of the asset.
The deduction is on top of the usual capital allowance deduction claimable for the asset as part of the taxpayer’s income tax return.
The deduction will be able to be claimed based on the applicable rate (30 per cent or 10 per cent) and the asset’s first and/or second elements of cost in terms of Subdivision 40-C.
The deduction is claimable in the income year in which the asset is installed ready for use.