Your questions answered by an industry expert
Tax break for small businesses - too good to be true?
I run a small business - I make films, videos, etc - and usually I don't take much interest in the Budget because I seldom find there is much there that actually helps me but this tax break for businesses buying equipment looks pretty good. However, I have learnt from people like you that if something looks too good to be true, it probably is. But if it is true, what do I have to look out for? Jack, Terrigal, NSW.
You are right on two counts but wrong on an important one Jack. It's smart to be suspicious of anything that looks too good to be true, but this tax break, or more correctly - this temporary investment allowance - is the real McCoy.
And secondly, Budgets usually offer crumbs to small business but this is the full loaf of bread. There's one problem and that is it does not cover computer software, which often is a critical investment for businesses in the modern world.
That acknowledged, the tax break should make businesses bring forward spending on things such as cars, trucks, computers, furniture and in your case cameras, processing equipment, etc.
If your business has a turnover of $2 million or more, the tax deduction you get kicks in if you buy a tangible business or investment good worth $10,000 or more. Your deduction is 30% and you have until June 30 to purchase the product but you have more time to install it - December 2010.
If your turnover is less than $2 million, you can now claim 50% of the purchase price as a tax deduction and you have until the end of the year to make the purchase. The minimum amount you have to spend to get the tax break is $1,000.
By the way, this tax break does not stop you claiming your usual depreciation allowances each year on tangible assets like the ones I am referring to.
So, why has the Government done this?
It wants us to spend on goods that create profits and jobs and they want it done sooner rather than later to ensure the recession is not deep and long. This is a great initiative and savvy businesses should be looking at mission critical equipment that they can buy during the time this break applies.
One word of advice - make a quick call to your accountant to ensure you understand how it applies to you and secondly, make sure you don't buy up big and create a cash flow problem that KO's your business!
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