Is your business in need of new equipment - why not take advantage of the 50% Tax Break for a Small Business?

Your business could be eligible for a 50% tax break if your annual revenue is less than $2 million - however you must act before 31st December 2009.

The Tax Break provides small businesses 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.

"If you have or are looking to purchase a new asset for your business costing more than $1,000 (excluding GST) between 13 December 2008 and 31 December 2009 you may be eligible for the Tax Break," says Sarah Wallace Baker Affleck's Tax and Business Services Manager.

It is important to note that the asset purchased must be a new asset - second hand goods do not qualify for the tax break - and must be installed by 31 December 2010. "The concession will apply to most things that are depreciable for tax purposes such as vehicles, computer hardware, machinery and equipment used mainly for business purposes," says Sarah.

So how does it actually work?

The Tax Break is an additional tax deduction only - it's not a cash refund.

Example 1: Maria is a small business owner who buys a computer for her shop and installs it in June 2009. Since the laptop will predominantly be used for business the following tax effect would apply:

Computer cost = $2,400 (excluding GST)
Software cannot be claimed as it is not a depreciating asset.
Maria will be able to claim an additional $1,200 tax deduction (50% of $2,400) in her 2009-10 business income tax return.
After applying the 30% company tax rate* (the rate which applies to her business), this tax deduction would reduce the amount of tax Maria's business would have to pay by $360.

Example 2: Peter is a builder; he operates his own small business. In August 2009 he purchased a new truck and equipment totaling $50,000. Given the truck and equipment are predominantly used in his business the following tax effect would apply:

Vehicle and equipment cost = $50,000 (excluding GST)
Peter will be able to claim an additional $25,000 tax deduction (50% of $50,000) in his 2009-10 business income tax return.
After applying the 30% company tax rate* (the rate which applies to his business), this tax deduction would reduce the amount of tax Peter's business would have to pay by $7,500.

Peter is also still entitled to the normal depreciation deduction for the equipment, saving him approximately $2,250 on the above example.

*If you're a sole trader, your personal tax rate would apply.

If you are looking at acquiring new equipment, the 50% tax break is a great tax incentive to do so. But you should always remember that even after the tax savings it is a still a cost to your business - acquiring a new asset is an important business decision - so only buy it if you need it.

This offer is only available to businesses with annual revenue is less than $2 million - and you must act before 31st December 2009.

If you have any questions please give Damien, Michael or Sarah a call to discuss.

Baker Affleck
Level 1, Solac House, 76 Appel Street, Surfers Paradise QLD 4217
PO Box 634, Surfers Paradise QLD 4217
Phone: (07) 5538 3088 • Fax: (07) 5539 0805 • Email: admin@bakeraffleck.com