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Claiming the tax break through sale and leasebackLast month's Baker Affleck newsletter featured an article about claiming the 50% tax break* if your annual revenue is less than $2 million - if you act before 31st December 2009. One of the problems for taxpayers wanting to acquire business assets and claim the 50% tax break deduction has been that leases aren't eligible. A recent (interpretative) decision by the Tax Office provides a way around this. The Tax Office has stated that, where a business taxpayer acquires an asset and then enters into a sale and leaseback arrangement a month later, they will be eligible to claim the tax break provided they satisfy all the other eligibility requirements. In the factual situation described, the asset concerned was to be purchased by the taxpayer - At the end of this period the taxpayer proposed to sell the asset to a financier and then lease the asset back. While the taxpayer is the lessee, the asset will continue to be used for the sole purpose of carrying on its business although it will no longer hold the asset for depreciation purposes. In these circumstances, the taxpayer can claim the tax break of 50% of the cost of the asset. (*) The tax break is 10% for larger businesses.
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