Investment Allowance

Small Businesses (with turnovers under $2M) can claim an investment allowance of 50% for the purchase of eligible assets ordered between 13th December 2008 and 31st December 2009, subject to the eligible asset being installed by 31st December 2010.  The Investment Allowance does not affect the amount of depreciation that can be claimed on the asset;  the Investment Allowance is in addition to depreciation.

To claim the Investment Allowance, the business must satisfy the business-purpose test.  If the asset being acquired was able to be depreciated under the Taxation Act and was primarily for the business with a minimum of 50% business use, then you are entitled to claim the Investment Allowance.  If there is some private use of the asset, which is not an exempt private use item, then the private use should be declared in the business' Fringe Benefits Tax Return.

The Investment Allowance is a tax deduction of 50% of the cost of an eligible depreciable asset.  For example, a business which purchases an eligible asset for $23,000 excluding GST, will be entitled to an Investment Allowance tax deduction of $11,500.  If the business is trading at a loss, the Investment Allowance is included in the carried forward taxation losses that can be claimed in future income years.

Small businesses with turnovers under $2M can claim the Investment Allowance on items from $1,000 upwards.  A business is able to group assets to establish the cost of $1,000, where those assets are part of a set or are substantially identical assets used for the same purpose, (eg set of spanners or a number of computer workstations attached to the same server) and the aggregate cost is $1,000 or more.

If you wish to purchase a luxury car, then the 50% tax deduction is only calculated on the luxury car limit of $57,180, irrespective of the cost of the luxury car.

If your turnover is over $2M, you can claim an Investment Allowance of 30% for expenditure on eligible assets ordered between 13th December 2008 and 30th June 2009, subject to the eligible assets being installed by 31st December 2010.  To claim the Investment Allowance for businesses with turnovers in excess of $2M, the minimum expenditure is $10,000.  For acquisitions made from 1st July 2009 to 31st December 2009, the Investment Allowance is 10%.

The Investment Allowance continues, but there are changes for businesses with turnover over $2m.

Small Businesses – turnover under $2m:

The Investment Allowance for small businesses with turnovers under $2m is 50% for eligible assets ordered before 31st December 2009 and installed before 31st December 2010 continues summarised as follows:

Ordered:	Installed by:	Investment Allowance %	Tax Year to claim:-
13/12/2008 to 31/12/2009	30/06/2010	50%	30/06/2010
13/12/2008 to 31/12/2009	31/12/2010	50%	30/06/2011

Other Businesses – turnover over $2m:

If the eligible asset is ordered prior to 30th June 2009 and installed before 30th June 2010 the Investment Allowance of 30% for expenditure on eligible assets applies.  For orders placed between 1st July 2009 and 31st December 2009 and installed before 31st December 2010 the Investment Allowance of 10% of eligible expenditure applies.

Ordered:	Installed by:	Investment Allowance %	Tax Year to claim:-
13/12/2008 to 30/06/2009	30/06/2010	30%	30/06/2010
13/12/2008 to 30/06/2009	1/07/2010 to 31/12/2010	10%	30/06/2011
1/07/2009 to 31/12/2009	30/06/2010	10%	30/06/2010
1/07/2009 to 31/12/2009	31/12/2010	10%	30/06/2011

Changes To Payroll Reporting

Recent changes in payroll reporting by Australian Government legislation has meant that salary sacrifice decisions now have to be recorded in more detail by employers and employers need to supply information on the salary sacrifice arrangements to the Australian Taxation Office.  The reason for these changes is that employees have been able to notionally reduce their income due to salary sacrifice arrangements.  This has made the taxpayer eligible for some other government programs, which they may not have been eligible for, other than for the benefit from the salary sacrifice arrangement.  The most significant salary sacrifice item is superannuation contributions. 

The concept of salary sacrifice is still legitimate and acceptable, however the flow on effect that, in the past, has enabled taxpayers to gain other government benefits, has been changed to ensure government monies are allocated where the government interprets the greatest need.  The government's view is that, if a taxpayer can afford to sacrifice a significant amount of his or her income into superannuation, then perhaps that taxpayer may not be eligible for other government benefits.  For this reason all payroll reporting will need to include new features effective from 1st July 2009.  If you are generating your payroll on your computer then your software provider will have to develop upgrades to ensure that you accurately record additional information from 1st July 2009. 

If you have any questions regarding the changes in payroll reporting, do not hesitate to contact us.