I received this from my bank yesterday. Any thoughts on this offer? I'm tempted to sell my work vehicle and buy a new one. I owe about $13 000 on my 5 year old vehicle and its worth about that at the moment. If i buy a new one for $30 000, after the tax incentive im actually only out of pocket $16 500, only $3 500 more debt but driving a brand new car. Correct?
I have already spent quite a bit on asset purchases this year anyway so this looks like being a bit of an unexpected bonus. Best reccesion ever
Small business tax relief
Effective date: eligible assets acquired between 13 December 2008 and 31 December 2009
As part of previous fiscal stimulus packages, the Government announced that small business (those with a turnover of less than $2million) would be able to claim a bonus tax deduction for the acquisition of eligible assets, in addition to the usual capital allowance deduction. Initially set as a 10% bonus deduction, and subsequently lifted to 30% for assets acquired by 30 June 2009, the bonus deduction has now been lifted to 50%.
To be an eligible asset for this bonus, the asset must;
- Cost more than $1,000 (although substantially similar assets may be aggregated in order to reach this threshold),
- Be purchased between 13 December 2008 and 31 December 2009, and
- Be used or installed ready for use by 31 December 2010.
As an example of the benefit this provides, for a small business being conducted through a corporate structure, for every $1,000 of eligible asset acquired, the total tax relief will be $1,500 – or $450 after tax, resulting in an overall after tax cost of $550 for a $1,000 acquisition cost.
The increase in the level of bonus deduction and extension of time for asset acquisition provides some relief for small business taxpayers who may have struggled to acquire these assets due to cash flow constraints.
For non-small business taxpayers, the minimum asset threshold to qualify for a bonus is $10,000 (subject to similar aggregation rules) and the bonus conditions are set out in the following table.
For cars, you must be operating a small business (turnover <$2m) and use the car in your business, and not be claiming your Motor Vehicle Expenses under the cents per km method. Also, it has to be a NEW car, not second hand.
If you bought a $30,000 car, you would get a TAX DEDUCTION of $15,000, resulting in a tax refund of $6975 at the highest marginal rate, or $4500 at 30% company rate.
Then you can claim depreciation on the car at the business use percentage, as per normal. You can claim 100% of the 50% incentive regardless of your busines use.
It's a huge incentive, I had to read it a few times before it sunk in.
is it possible to use an ABN that has not traded and receipted income to receive this incentive?
is it possible to use an ABN that has not traded and receipted income to receive this incentive?
The legislation says you must be running a business.
This sounds incredible. just to clarify, when would you recieve the 50% tax deduction? For example at the time of purchasing a vehicle or at the end of tax year?
The deduction would be claimed in your tax return, along with all of your other deductions for running your business.
great thanks dan.
I found this
"As an example of the benefit this provides, for a small business being conducted through a corporate structure, for every $1,000 of eligible asset acquired, the total tax deduction will be $1,500. A $1,500 tax deduction provides a tax saving of $450. Therefore the overall after tax cost of $1,000 acquisition would be $550."
But I have not yet found a reference to benifit for a sole trader type of buisiness. Can anyone enlighten me if an individual with an ABN operating as a buisiness is eligible for these Tax Breaks?
Hi Mick,
Yes, this is available for anyone operating a business, regardless of the structure they are using. The tax saving is harder to quantify, due to the marginal tax rates. On the above example, at top marginal rate, that tax saving would be $1500 x 46.5%, = $697.50.
To qualify for the 50% reduction, your turnover must be under $2 million.
As an example of the benefit this provides, for a small business being conducted through a corporate structure, for every $1,000 of eligible asset acquired, the total tax relief will be $1,500 – or $450 after tax, resulting in an overall after tax cost of $550 for a $1,000 acquisition cost.
I think this example is a little misleading when applied to vehicles. It assumes you are able to claim the 50% bonus as well as the 100% of the initial purchase in the first year. The 100% is still depreciated normally.
As posted earlier a $30000 car would only end up costing $16500 !! after tax return (Wish it was true, i would buy a new car tommorrow).
Dont you just get back 30% (company tax rate) of the 50% ?
So it really just knocks off 15% of the purchase price, not bad, but not as good as some people think.
jazz77 wrote:Dont you just get back 30% (company tax rate) of the 50% ?
So it really just knocks off 15% of the purchase price, not bad, but not as good as some people think.
Plus the yearly depreciation. So over the life of the asset, you would get the tax deductions as described earlier, assuming no private use reduction.
Here are some more examples and further info
http://taxbonus.com.au/Howitworks/tabid/314/Default.aspxTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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