# ATO 30% capital grant to June 30?



## kingbrown (17 April 2009)

Has any one heard of the recent announcement by the Federal Govt ?

Re 30% capital investment allowance ?

Apparently applies to all new capital purchases over 10k for small business with a turnover under 2 million a year until June 30 only
This is on top of your normal depreciation 

Sounds too good to be true ?
Would allow you to save a fair amount on new wheels ?

Also talk that it has not been passed by the senate yet but we are running out of time as June 30 is not far away 

Any tax experts or comments out there ?


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## Trevor_S (18 April 2009)

Yes and I bought forward my business renovations to make use of this.  I had several capital purchases in that renovation that will qualify.  

Maybe I should replace my Ute as well   Nahh, it's barely 2 years old and I am such a tight wad !


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## kincella (18 April 2009)

Holden is offering a 'holden owners grant' is...ad on tv last night...
here is the grant amounts
http://www.holden.com.au/Satellite?c=Page&cid=1220614939528&pagename=Holden.com.au/HLDPageDispatch

http://www.holden.com.au/home


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## tech/a (18 April 2009)

Why would you bother when you can pick things up at their OWN auctions at FAR better value! Most still under Warrenty---same goes for Trucks and earthmoving equipment.
Sure its a help with reno's but not for guys like us---still small business but over the Qualifying T/O


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## rcm617 (18 April 2009)

kingbrown said:


> Has any one heard of the recent announcement by the Federal Govt ?
> 
> Re 30% capital investment allowance ?
> 
> ...




Applies to anything $1000 and over for small business, so a good time to upgrade that computer as well.


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## kincella (18 April 2009)

I am tempted to buy a new car...but I dont like Holdens ...been a Ford person....but Holden is taking about 3000 off the small cars and over 8000 on the big ones....then on top of that...you get to claim the 30% investment allowance...if it passes as law....
I do not need a new car...only done 54,000 klms so far....I dont travel by car much
maybe the other car makers will follow holden
cheers


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## ShareGuy (18 April 2009)

Even if you buy after 30 June you will get a 10% investment allowance on assets over $1000


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## aohx075 (18 April 2009)

Where can I find more information on this? I'm at the ATO website but can't seem to find anything about it.


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## MS+Tradesim (18 April 2009)

More info:

http://www.ato.gov.au/taxprofessionals/content.asp?doc=/content/00175431.htm


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## Luthien (18 April 2009)

The title of the thread "ATO 30% capital grant" may be misleading.

Don't make the mistake of thinking you get 30% of your payment back from the ATO. The 30% is a tax deduction from your business income. 

For example - $60,000 capital investment results in a $18,000 tax deduction which results in $5400 cash flow back to your business. 
This is in addition to the normal depreciation allowances.

It's all very welcome but do your sums first


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## drsmith (18 April 2009)

Would primary producers (farmers) qualify for this ?


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## kingbrown (20 April 2009)

Luthien said:


> The title of the thread "ATO 30% capital grant" may be misleading.
> 
> Don't make the mistake of thinking you get 30% of your payment back from the ATO. The 30% is a tax deduction from your business income.
> 
> ...




I think Luth may have a point 
Have done some home work on this and its appears to be actually known as 

*PROPOSED FEDERAL GOVERMENT TEMPORARY INVESTMENT ALLOWANCE ( "IA" ) REGIME *
So my thread heading is a bit off but we all get the point 
*( 30% ATO Investment Allowance ? ) *

apparently the IA will apply to new tangible assets such as 
New cars, new trucks, new forklifts etc 

Contract to aquire asset 13/1208 to 30/06/09 
Delivered ready for use by 30/6/10 
Investment allowance 30% 

Will try treasury for a link ?

Ciao KB


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## kingbrown (20 April 2009)

Trevor_S said:


> Yes and I bought forward my business renovations to make use of this.  I had several capital purchases in that renovation that will qualify.
> 
> Maybe I should replace my Ute as well   Nahh, it's barely 2 years old and I am such a tight wad !




Trev you may be able to put a order in before June 30 
Then say you want delivey in a year before June 30 2010 
imo it looks as if you have the contract to aquire you may be able to claim the 30%

Any comments out there ?


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## kingbrown (20 April 2009)

OVERVIEW
3. The Tax Break provides additional support – in the form of a bonus tax deduction – for Australian businesses undertaking capital investment in 2009.

3.1. The Tax Break is available for new, tangible depreciating assets for which a deduction is available under the core provisions of Division 40 of the Income Tax Assessment Act 1997 (ITAA97) or new expenditure on existing, eligible assets.

3.2. A bonus tax deduction is available where a business acquires an eligible asset after 12 December 2008 but before the end of December 2009 and has it installed ready for use before the end of December 2010.

3.2.1.Where a business acquires the eligible asset before the end of June 2009 and has it installed ready for use before the end of June 2010 the bonus deduction will be 30 per cent of the cost of the asset (exclusive of GST). Otherwise the deduction will be 10 per cent of the cost of the asset.

3.3. A business acquires an asset when they enter into a contract to hold an asset, start to construct an asset or start to hold the asset in some other way.

3.4. Small business entities will only need to spend a minimum of $1,000 per asset in order to qualify for the Tax Break. All other businesses will need to meet a minimum expenditure threshold of $10,000 per asset.

3.4.1.These expenditure thresholds apply to both 30 per cent and 10 per cent bonus deductions.
3.5. The Tax Break subsumes the temporary investment allowance announced in the Treasurer’s Press Release No. 141 of 12 December 2008. Legislation to implement the investment allowance was not introduced to Parliament.
3.6. The Tax Break draws, where possible, on concepts from Division 40 of the ITAA97, but the Tax Break has a different objective to the uniform capital allowances regime.

4. All references to legislation in this paper are references to the Income Tax Assessment Act 1997, unless otherwise stated.
Page 1
FREQUENTLY ASKED QUESTIONS
QUESTION 1””WHAT IS THE STATUS OF THE TAX BREAK?

5. Legislation to implement the Tax Break has not been introduced into Parliament. Treasury has released draft legislation for public consultation. The draft legislation and draft explanatory memorandum are available from the Treasury website (www.treasury.gov.au).
QUESTION 2””DO SECOND HAND ASSETS QUALIFY?

6. The Tax Break will not apply to second hand assets.

7. The draft legislation and explanatory memorandum, available from the Treasury website (www.treasury.gov.au) provide additional guidance on what counts as a ‘new’ asset for the purposes of the Tax Break.
Draft legislation: Schedule 1, part 2, paragraph 41-120(1)(e) and section 41-130
Draft explanatory memorandum: Paragraph 1.40

QUESTION 4””DO CARS QUALIFY?
9. The Tax Break is available for new, tangible depreciating assets which a deduction is available under the core provisions of Division 40 or new expenditure on existing assets.
10. New motor vehicles used for business purposes are an example of the kind of assets that could qualify for the Tax Break (provided all the criteria are met). Further detail around how the Tax Break will apply to cars can be found under question 15 of this document.
Draft explanatory memorandum: Paragraphs 1.29 to 1.34 Page 2
QUESTION 5””ARE DEMONSTRATOR VEHICLES NEW OR SECOND HAND ASSETS?
QUESTION 7””DO BUILDINGS QUALIFY?
14. The Tax Break will be available for new tangible depreciating assets for which a deduction is available under the core provisions of Division 40 and new expenditure on existing assets. Capital works covered by Division 43 will not qualify for the Tax Break.
Draft explanatory memorandum: Paragraph 1.27

QUESTION 8””ARE PRIMARY PRODUCTION ASSETS, DEPRECIATED UNDER SUBDIVISION 40-F, ELIGIBLE FOR THE TAX BREAK?
15. The core provisions of the uniform capital allowance in Subdivision 40-B will provide the framework for determining which assets are eligible and who is entitled to claim the bonus deduction.
16. This means that assets that already receive concessional capital allowance deductions under other subdivisions ”” such as assets used for primary production depreciated under Subdivision 40-F ”” will not qualify for the Tax Break.
Draft explanatory memorandum: Paragraphs 1.25 to 1.26 Page 3
QUESTION 9””IS THE TAX BREAK ONLY AVAILABLE TO SMALL BUSINESS ENTITIES?
17. No ”” both the 30 per cent and 10 per cent bonus deductions are available to all businesses. However, small business entities will only need to spend a minimum of $1,000 per asset in order to qualify for the Tax Break. All other businesses will need to meet a minimum expenditure threshold of $10,000 per asset. These expenditure thresholds apply to both 30 per cent and 10 per cent bonus deductions.
Draft legislation: Schedule 1, part 2, section 41-135
Draft explanatory memorandum: Paragraphs 1.45 to 1.47
QUESTION 10””DO SMALL BUSINESSES USING DIVISION 328 QUALIFY?
18. A small business taxpayer who chooses to deduct amounts for depreciating assets under Subdivision 328-D will not be ineligible for the Tax Break merely because they make such a choice.
Draft legislation: Schedule 1, part 2, paragraph 41-105(2)(b)
QUESTION 12””WHAT IF I DON’T MEET THE JUNE 2010 INSTALLATION DEADLINE?
20. If you acquire or start to hold an eligible asset between 13 December 2008 and the end of June 2009 and miss the end of June 2010 installation deadline you will miss out on the 30 per cent bonus deduction. However, provided the asset is installed by the end of December 2010 you will still qualify for the 10 per cent bonus deduction.
Draft legislation: Schedule 1, part 2, subsection 41 115(3)
Draft explanatory memorandum: Paragraphs 1.75 to 1.78
23. The Tax Break will provide a bonus deduction rather than bringing forward normal deductions for an asset’s decline in value. This mean that, over time a taxpayer could effectively claim deductions of up to 130 per cent of the asset’s value.
24. The Tax Break will not impact on balancing adjustment events. For example, the Tax Break will not affect the tax treatment of an asset upon disposal.
Draft explanatory memorandum: Paragraph 1.79
QUESTION 15””WILL THE CAR LIMIT APPLY TO THE TAX BREAK?
25. Under the core provisions of Division 40, luxury cars (those that cost more than the car limit) have their cost reduced to the car limit for the purpose of calculating capital allowance deductions. As the Tax Break relies on the core provisions of Division 40, the car limit will apply to eligible luxury cars.
26. This means that a taxpayer who is eligible to claim the Tax Break for a luxury car will have to use the car limit when working out the amount of their deduction.
27. The car limit for 2008-09 is $57,180 and is indexed annually in line with the index number for the motor vehicle purchase sub-group of the CPI. This means that, at the 30 per cent rate, the maximum bonus deduction available for a car in 2008-09 is $17,154.
Draft explanatory memorandum: Paragraphs 1.59 and 1.60
QUESTION 16””I HAVE STILL HAVE MORE QUESTIONS. HOW CAN I GET MORE INFORMATION ON THE TAX BREAK?
28. This paper has been released alongside draft legislation and a draft explanatory memorandum. These documents provide further guidance on how the Tax Break will operate and are available on the Treasury website (www.treasury.gov.au).
29. If you are unable to find an answer to your question, please send an email to investmentallowance@treasury.gov.au.
Page 5




Heres the link to treasury for the full list 

http://treasury.gov.au/documents/1487/PDF/Frequently_Asked_Questions.pdf


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## Trevor_S (21 April 2009)

kingbrown said:


> Trev you may be able to put a order in before June 30




That's how I read it but just to qualify your original post

For small business enterprises i.e. where you have a turnover of < $2m the investment allowance is 30% for new plant costing > $1,000.

For those entities that have turnover > $2m the investment allowance is 10% for new plant costing > $10,000.

My recent store renovation had several new capital items >$1000 (from a new mac mini to new refrigeration systems etc etc), so these all qualify.  I had thought this was the case but double checked with my Accountant.  

I only qualify as a small business this year because I sold half my stores last (financial) year and of course, it's not a rebate but a deduction and as you pointed out, it's not law ... yet... but hell, my store badly needed renovation anyway, just bought it forward (planned for Q4 2009) on the assumption it would get through

I won't be getting a new Ute, my "old" (Hilux extra cab 4x4 diesel ute) one only has 40,000km on the clock, just thinking out loud


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## bellenuit (22 April 2009)

Does anyone know how this investment allowance should be handled from an accounting point of view. I have my own company that I use for share trading and in order to keep my accounting fees as low as possible, I try to prepare as much of my income statement and balance sheet as I can before submitting to my accountant for checking and completion.

Lets say I buy a $3000 computer on 1st April and am depreciating that over 3 years prime cost.

So normally this would result in the following transactions.

Debit - Office Equipment (Fixed Assets): $3000
Credit - Cash at Bank: $3000
And at year end...
Debit - Depreciation Expense: $250 (approx - 1/4 of year)
Credit - Office Equipment (Fixed Assets): $250 (e.g. accumulated depreciation)

What additional transactions (both entries) to I need to do to handle the 30% investment allowance?


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## ShareGuy (22 April 2009)

bellenuit said:


> Does anyone know how this investment allowance should be handled from an accounting point of view. I have my own company that I use for share trading and in order to keep my accounting fees as low as possible, I try to prepare as much of my income statement and balance sheet as I can before submitting to my accountant for checking and completion.
> 
> Lets say I buy a $3000 computer on 1st April and am depreciating that over 3 years prime cost.
> 
> ...




Those entries are fine as accounting depreciation differs from tax depreciation, your accountant should do a tax rec in their workpapers (internal documents) to show the extra 30%. If its a laptop your buying you should use the Diminishing Value Method as you are allowed 50% depreciation + the 30% which is pretty good. A desktop's dep is a bit lower can't remember what exactly.


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## bellenuit (23 April 2009)

ShareGuy said:


> Those entries are fine as accounting depreciation differs from tax depreciation, your accountant should do a tax rec in their workpapers (internal documents) to show the extra 30%. If its a laptop your buying you should use the Diminishing Value Method as you are allowed 50% depreciation + the 30% which is pretty good. A desktop's dep is a bit lower can't remember what exactly.




Thanks. Just to clarify, are you saying that the 30% investment allowance has no impact on the company's Income Statement and Balance Sheet, outside of the items relating to tax payable and provision for taxes? It only gets taken into account in the company's tax return?


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## Taltan (23 April 2009)

Sorry to complicate but here is the answer

in terms of the entries you give your accountant than yes the investment allowance will only affect the tax reconciliation he/she prepares and will not affect your Income Statement or Balance Sheet. 

In terms of tax planning and whether you should take up the allowance its a bit more complicated. Thats because the accounting to tax difference caused by the allowance needs to be taken up somewhere in the company's books. For example lets say your accounting profit is $100 and your taxable profit is $70 (due to the $30 allowance). You will pay tax on the $70 profit so all looks rosy. However one day you are going to want to get the money out of the company and for reasons too complex for me to have the time to explain you may or may not end up paying the extra tax on the $30. Broadly it will depend on the company's history and on the position of the company's shareholders.

The above answer is of course further complicated by the fact that the laws have not yet passed the senate. If the Libs agree this should happen around mid-May. If not its of course dependent on the whims of the Greens, Xenophon or Fielding


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## bellenuit (6 November 2009)

I bought an Apple Computer before June 30th and also took out an extended warranty on the computer (called Applecare) at an additional cost of $268.

Does the extended warranty qualify for the 50% small bonus incentive too?

I understand that only depreciable items qualify and only those that cost over $1000. Do I add in the cost of the extended warranty to the cost of the computer and then depreciate them as a whole (as the extended warranty on its own is under $1000). The computer, being a desktop, is been depreciated over 4 years, but the extended warranty only extends the warranty from 1 to 3 years (telephone support from 3 months to 3 years). How would the accountants out there handle this? TIA.


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## gav (30 November 2009)

I have an ABN, I use it for odd jobs I do on my days off from my full-time job (eg. work on my parents farm).  However I only have a very small turnover ($3-5K per year approx).  Am I eligible to purchase a car and receive the 50% investment allowance, even though that 50% deduction would be far greater than the than the profit I make per year from my ABN?

It may sound like a stupid question, but I can't find anything on the ATO website that says I wouldn't qualify.  I meet the qualifying criteria listed on their website:
    * carry on a business
    * buy the asset by the deadline
    * use or install the asset by the deadline
    * meet the minimum thresholds
    * use the asset principally in Australia and principally in your business, and
    * are eligible to claim a deduction for the asset's decline in value under section 40-25 of the Income Tax Assessment Act 1997.

Website: http://www.ato.gov.au/businesses/content.asp?doc=/content/00193781.htm&page=6&H6


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