How to get the 50% tax allowance

Businesses with annual revenue of less than $2 million are being urged to take advantage of the Government’s special 50% investment tax allowance.

The allowance was increased from 30% to 50% in the Federal budget as part of the Government’s measures to simulate the economy.

Greg Hayes, senior partner at tax firm Hayes Knight, says businesses would be smart to cash in on the increased allowance.

“It’s a great initiative for those businesses earning under $2 million in turnover,” he says.

“Anybody who purchased an asset between 13 December 2008 and the end of this year, 31 December 2009, providing the asset is installed by 31 December 2010, will get a 50% investment allowance.”

Hayes says the extended concession applies to depreciating tangible assets subject to tax deductions under Division 40 of the Income Tax Assessment Act which are over $1000 in value.

“Things like software and paying someone to put a website together – that won’t qualify. It has to be a tangible asset, such as a laptop computer,” he says.

Mark Northeast, partner at Pitcher Partners, says that what businesses can claim will vary from industry to industry.

“The concession will apply to most things that are depreciable for tax purposes. Cars are a big one for businesses, computer hardware, but not software; if you’re in construction or a builder it could be something like a generator,” he says.

Hayes also says there is an opportunity to claim bundled assets under the concession. “You might have three different assets integral to the same function, then arguably you can bundle those to get them over $1000.”

For example, buying tables, chairs and a sofa for a conference room, which cost more than $1000 in total, could be claimed.

Hayes also says that businesses are not required to use the asset primarily for business purposes.

“What the legislation says is that the asset must be primarily used in the business, but it must be used more than 50% in the business – not pro rata. If you bought a car, and say used 20% of its usage for private purposes, you are still entitled to do that.”

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There are a number of technicalities that small businesses looking to claim the 50% investment tax break need to be aware of. SmartCompany tax expert Terry Hayes explains which assets can be purchased under the allowance, outlines the key dates to be aware of and even explains some real-life examples. Read more.

How the 50% tax allowance can set your business up for the next five years

With the green shoots of economic recovery starting to emerge, there has never been a better time to use the 50% tax allowance to invest in new IT systems and equipment. Not only will you get a bargain, but when the recovery comes, you’ll be way ahead of your competitors. Read more.

Tax expert Greg Hayes answers your questions on the 50% tax allowance:

Can I use the 50% tax allowance to buy an overseas asset?

I am a real estate agent paid on commission. Can I get the 50% tax rebate on a new car?

Can I claim an LPG conversion under the 50% allowance?

Do businesses with turnover of over $2 million still get to claim a rebate?

Can I buy and then sell an asset and still claim the 50% allowance?

How does the 50% allowance work? Is it a rebate or a tax deduction?

Can I use the 50% tax break to upgrade my computers?

Will I still get the 50% investment allowance if I lease new vehicles?

I have bought a number of small items that add up to $1000. Can I get the 50% allowance?

Can I use the 50% rebate to buy a car, even if it’s mostly for personal use?

When will I actually get my money back under the 50% tax break?

Can I claim the 50% rebate if I use my laptop for business and home?

Can I use the 50% tax rebate for my holiday house?

Does the 50% tax rebate apply to property?

How does the 50% tax rebate affect depreciation?

Can I buy a luxury car under the 50% tax rebate?

Can we get the 50% rebate if we are just starting a business?

How will we claim the 50% rebate for small business on our BAS?

Can I still take advantage of the new tax break if I don’t make a profit this year?

I bought a computer in March. Can I get the 50% rebate?