temporary investment allowance

Temporary Investment Allowance

The following is a guide only. Please consult with an accountant if you are seeking taxation advice.

The Small Business and General Business Tax Break, which is also referred to as the Temporary Investment Allowance, was announced by the Federal Government on December 12 2008. The Bill was introduced into Parliament on March 19 2009. As part of the Government's Nation Building and Jobs Plan, it is designed to bolster economic activity by boosting business investment and supporting Australian jobs.

The Temporary Investment Allowance (TIA) is an additional tax deduction that businesses qualify for when purchasing new assets, or when investing new funds in assets they already hold. The deduction can be claimed on top of the standard deductions for depreciation of the asset's value.

The TIA provides two distinct levels of additional tax deduction, dependent upon the date on which the assets are acquired.
● There is a tax deduction of 30% of the cost, excluding GST, of assets acquired after 12.01am AEDT on December 13 2008 but before July 1 2009, which are installed and ready to use by the end of June 2010.
● A tax deduction on 10% of the cost, excluding GST, applies to new assets acquired between July 1 2009 and December 31 2009, which are installed and ready to use by December 31 2010. Additionally, assets acquired before July 1 2009, not installed ready for use by July 1 2010 but ready to use by December 31 2010, also qualify for the 10% deduction.
Assets acquired before the end of 2009 but not ready for use by the end of December 2010 will not qualify for the TIA.

Businesses claim the TIA in the income year in which the installation of the asset is completed, making it ready for use. The tax deductions are additional to any other tax break the assets are eligible for, which means that in the course of time a business could effectively claim deductions to the value of 130% or 110% of the asset's worth, depending upon the deduction bracket they fall into. The Temporary Investment Allowance is a bonus deduction.

In order to qualify for the TIA, an asset must cross the following two thresholds. Firstly, it must be a new asset such that it has had no prior use by anyone, in any location, for any purpose excepting testing. Secondly, there must be a minimum spend in order to be eligible, which depend upon the size of the business:
● A business with a turnover of less than $2 million in the preceding financial year, and with projected turnover of less than $2 million in the current, is deemed a 'small business'. For a small business, the value of the asset must be at least $1,000 (exc. GST) to qualify.
● For all other businesses, with annual turnover greater than $2 million, the minimum spend per asset is $10,000 (exc. GST).
The minimum spend applies to both the 30% and 10% tiers of the TIA, although in the case of multiple investments in an individual asset, the cumulative value of these investments is considered for the purposes of the additional deduction.

Vehicles whose value exceeds the 'luxury car limit', set at $57,180 for 2008-09, already have their cost reduced to the limit when working out capital allowance deductions. Therefore, if a vehicle valued at more than the limit is eligible for the TIA, its value above $57,180 will be discounted when calculating the additional deduction. It follows that the maximum additional deduction for a vehicle that falls into the 30% bracket will be $17,154, and for those in the 10% bracket the maximum deduction would be $5,718.

For information from the government website, please visit here