As part of their broader economic stimulus package, on 12
December 2008 the Federal Government announced an investment
allowance giving business taxpayers an additional 10% capital
allowance deduction for new tangible assets.
When does the allowance apply?
Where a taxpayer acquires an asset or starts to construct an
asset under a contract entered into between 13 December 2008 and 30
June 2009, the allowance will apply. Assets must be installed ready
for use by 30 June 2010.
What assets are eligible for the allowance?
Assets must satisfy a number of criteria in order to be eligible
for the investment allowance:
the asset must be a tangible asset eligible for deduction
pursuit to the capital allowances regime in Division 40 of the
Income Tax Assessment Act 1997
the asset must be new, in the sense that the taxpayer started
to hold the asset or the asset commenced to be constructed between
13 December 2008 and 30 June 2009. Depreciating assets held before
13 December 2008 will not be eligible for the allowance, however it
appears that additional spending between the above dates on
existing assets (ie improvements) will be eligible for the
the asset must be used by the taxpayer in carrying on a
business. That is individual taxpayers not carrying on a business
but using assets such as cars or rental properties for the purpose
of producing assessable income will not be eligible for the
only assets costing more than $10,000 will be eligible for the
Which assets are excluded from the allowance?
The following assets will be ineligible for the allowance:
intangible assets such as intellectual property and rights
assets outside the scope of Division 40 such as trading stock
and land and buildings
items costing less than the $10,000 threshold such as computers
and other low costs assets.
Motor vehicles are not excluded from the allowance.
Additional requirements and features of the allowance
The allowance gives taxpayers a further 10% deduction to that
which they are otherwise entitled in respect of eligible assets.
For example, where an asset is acquired and installed ready for use
on 28 June 2009, the taxpayer will be entitled to 3 days
depreciation at ordinary rates plus 10% of cost for the 2009 income
The allowance will be claimed through the taxpayer's tax
return for the relevant income year.
No draft legislation was released at the time of the
While it provides taxpayers with a narrow investment window for
obtaining the deduction, the allowance will provide taxpayers with
an additional incentive for increasing expenditure on revenue
generating assets. As with allowances used in earlier years to
increase business spending, it is hoped that the incentive will
encourage spending thus stimulating an otherwise lagging
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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