Are you thinking of taking advantage of the business tax break? Here is some information to help you separate fact from fiction.
Myth: It’s too late to take advantage of the business tax break
No, it’s not too late, but you do need to make a decision very soon. The deadline for buying eligible assets is 31 December 2009, and you then need to use or install the asset by 31 December 2010. To be eligible for the 50% bonus tax deduction, your business needs to have an annual turnover of less than $2 million and the asset needs to cost $1,000 or more.
If your business turns over $2 million or more, you can still claim a 10 per cent tax deduction for eligible assets (costing $10,000 or more) if you purchase them by 31 December 2009 and use them (or install them ready for use) by 31 December 2010.
Before making any investment, make sure you get all the facts about how the business tax break might apply to your personal circumstances.
Myth: I can claim the tax break on any asset, including second hand items
No, you can’t – only certain assets are eligible. This includes new, tangible, depreciating assets (such as a new business vehicle) and improvements or additions you make to existing assets (such as a new engine for an existing business vehicle). It doesn’t include repairs or second hand goods.
Myth: I only need an ABN to qualify
Wrong. Just having an ABN doesn’t mean you’re eligible. There are a number of eligibility criteria the buyer and the asset have to meet to qualify for the tax break. As a starting point, the buyer needs to be in business and the asset needs to be used principally for business purposes.
Myth: I will get cash back
No, you will not. The business tax break is an extra income tax deduction, not a tax bonus, rebate or offset. You claim this extra deduction in your income tax return.
Myth: I can buy an asset to get the tax break, then immediately sell it
No, you can’t. If you buy an asset and resell it soon after you bought it, it’s unlikely the asset will be used in the required way, that is, ‘for the principal purpose of carrying on a business’. You would therefore not be entitled to claim the tax break.
Myth: I can claim the extra deduction this financial year (2009–10) even if I don’t use the asset until next financial year (2010–11)
No, you claim the extra tax deduction in the income tax return for the year in which you first use or install the asset, which in this case would be 2010–11.
Business Tax Break …. More Details
