The special temporary fifty percent tax break announced in the Government’s Economic Stimulus Package in the May Budget runs out on 31st December 2009.

So if you want to take advantage of this you will need to act quickly!

But before you do so there are a few elements of confusion that we will attempt to clarify- but remember we are not your accountants so don’t accept this as qualified advice. (see our disclaimer at the end of this article).

WHAT IS IT?

The temporary tax break was first introduced in December 2008, and the rate (under certain circumstances) was increased to 50% in May 2009.
It means that those who are eligible to claim can deduct 50% of the cost of the acquired asset in their next tax return.

WHO GETS IT?

The 50% tax break was aimed at helping small business, and, in the words of the tax office “generally means that the taxpayer is carrying on a business and has a turnover of $2m p.a. or less.

WHAT DO YOU GET IT ON?

On the purchase of a new eligible asset that is used in your business. For this article we are talking about cars, vans, trucks and any motorized transport used in the normal course of carrying on a business.

IS THERE A LIMIT ON THE PRICE?

Not exactly.
There is no limit on how much you pay for the vehicle.
However there is a limit on the amount of a deduction you can claim.
The luxury car tax clicks in on a new car at $57,180.00, and that’s where the 50% deduction stops.
So if, for example, you have bought a new vehicle costing $70,000 you can only claim a tax break of fifty percent of $57,180 (that is actually $28,590, so it’s still a very valuable benefit to you).

WHAT ABOUT DEMONSTRATORS – do they qualify?

Yes….and no.
Bear in mind that the law has not been tested in court so everythiong is open to interpretation.
The general view is that if you are interested in buying a demonstrator you need to buy one that was registered less than three months ago to be sure that you get your allowance. A demonstrator that is twelve months old and has 10,000 kms. on the clock is unlikely to be considered ‘new’ by the tax office.

DO I HAVE TO TAKE DELIVERY BEFORE THE 31st DECEMBER?

No, not necessarily, but be very careful here.

You must place your order by 31st December and take delivery in 2010.
But if you plan to finance the vehicle you may fall into the trap of the unwary!

Simply put, if you wish to lease your vehicle or use hire purchase you are required to order and purchase by 31st December.
If you are paying cash you are OK to place the order in 2009 and await delivery in 2010.
But there is another way out….
If you want to finance your new car and are able to order it by 31 December, but do not expect to take delivery immediately all is not lost!
Talk to us and we can explain a way to achieve what you want.

CAN I BUY MORE THAN ONE VEHICLE?

Well, that depends on their use.
If you can justify that both are used in the normal course of your business (which has a turnover of less that $2m p.a.) then yes, you can purchase both vehicles and get your allowance on both.
But if you can’t convince the tax man that the vehicle is essential for work then you might not get the break.

These, then, are the most common queries that we have faced on this issue and we hope they have been of help to you.

Please note that the information on this page is of a general nature only and is not intended for advice. You should consult a registered tax agent to obtain information and advice specific to your situation before making any decisions involving the Temporary Investment Allowance.