On 12 December 2008, the Government announced an initiative to
boost economic activity, in the form of an investment allowance.
The investment allowance is an additional 10 percent tax deduction
for new tangible depreciating assets. This concession is
The measure is estimated to cost the Commonwealth $1.6
What is the investment allowance?
The allowance will be in the form of an additional tax
deduction equal to 10 percent of the cost of an eligible asset,
that is, a 10 percent tax deduction on top of tax deductions
allowed under the current capital allowances (depreciation)
When does the investment allowance apply?
The investment allowance will be available for assets held
under a contract entered into and assets commenced to be
constructed between 12.01am AEDT 13 December 2008 and 30 June
The asset needs to be installed and ready for use for a taxable
purpose by 30 June 2010 in order for the investment allowance to be
claimed. This represents a very narrow window for the
It can be claimed through the income tax return in which the
first capital allowance is claimed for the asset.
The amount did not contain any proposed restrictions upon
claims by finance entities.
There was no comment on eligibility for assets where the end
user is in the public sector or is a non-resident. However, one
would expect rules to disallow or to limit the allowance in such
What assets qualify?
The investment allowance will apply to tangible assets used in
carrying on a business for which a deduction is available under the
core capital allowances provisions, ie. Subdivision 40-B of the
Income Tax Assessment Act 1997.
The expenditure must be on new assets or new expenditure on
existing assets. Assets previously used or held for use will be
Cars are not excluded.
What assets do not qualify?
The investment allowance is not available for intangible assets
and certain rights.
Further, land and trading stock do not constitute depreciating
assets and therefore do not qualify.
Capital works (building allowances) which are claimed under
Division 43 of the Income Tax Assessment Act 1997 do not
Assets for which a tax deduction can be claimed under other
subdivisions of Division 40 do not qualify (eg software development
What is the minimum cost?
The investment allowance will be available on new assets which
cost more than $10,000.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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