Budget 2009: Small business tax break boosted from 30% to 50%

Purchase IT or POS hardware and enjoy the benefits

 

The Federal Government will increase the business tax break for assets purchased before the end of 2009 from 30% to 50%. This will apply for companies with turnover of less than $2 million.

 

The small business tax break was introduced earlier this year as part of the Rudd Government’s stimulus measures, and has been applauded by business groups as a way of assisting growing businesses through the downturn and stimulating economic growth by pulling forward investment.

 

Under the original model, the tax break was set at 30% for assets over $1000 that were purchased between 13 December 2008 and 31 December 2009 and installed by 31 December.

 

But under the new 50% tax break, the business will be able to claim a tax deduction of $15,000 (that is, 50% of $30,000).

The decision to boost the size of the tax break will cost $141 million, taking the total cost of the measure to $3.7 billion.

“The increased tax break provides small business with an even greater incentive to invest in new capital items, such as computer hardware and business vehicles, and to make capital improvements to existing machinery and equipment,” Small Business Minister Craig Emerson said in a statement.

 

Businesses with annual revenue of less than $2 million are being urged to take advantage of the Government's increased investment allowance announced in the federal budget.

Federal Treasurer Wayne Swan said that the allowance will be extended from 30% to 50% for assets purchased by eligible businesses - but second hand items are out of the question.

 

Here are three examples of how you can take advantage of it:

 

  1. Maria runs a retail clothing store and meets the definition of a small business entity. On 7 June 2009 she buys and installs two new Point of Sale Terminals. The terminals $995 each and are substantially identical, so the cost of each terminal can be amalgamated for the purposes of meeting the $1000 threshold. Maria's total investment is $1990 and she will be eligible to claim a $995 bonus deduction (being 50% of $1990) in her 2008-09 income tax return.

  2. Ben operates a courier service. He also meets the definition of a small business entity. He orders and takes delivery of a new, more efficient Server for storing company records in June 2009 at a cost of $15,000. Ben will be eligible to claim a bonus tax deduction of $7,500 in his 2008-09 tax return.

  3. Top Candidates is a small recruitment business. On 12 October 2009, the company purchases and installs a new network switch a cost of $2500. It will be eligible for a bonus deduction of $1250, which it can claim in its 2009-10 tax return.