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January 2011 Newsletter

Personal Property Securities (PPS)
Current Depreciating Asset Issues
Budget Promises Fade Away
Current Depreciating Asset Issues
.

Although the major decision times may have passed, it is worth restating the tax break allowances rules, before some businesses finalise their 2010 income tax returns.

In practice, most Depreciation Tax Break Deduction claims are likely to occur in 2009/10 tax returns due to the short time period between Royal Assent to the measure and 30 June 2009 creating uncertainty.

A Tax Break Deduction is potentially claimable in a business taxpayer’s 2009/10 tax return at 50%, 30% or 10% of cost (including subsequent capital costs) where:

  • First Use Time occurred in 2009/10;
  • Commitment/investment time occurred in 2008/09; or 2009/10

The eligibility conditions to be satisfied regardless of the year the tax break deduction are:-

As at First Use Time (i.e. first use/installed ready for use):

  • Asset is New: and
  • Asset to be used principally in Australia; and for the principal purpose of carrying on business: and
  • Asset is a tangible depreciating asset and not excluded (e.g. not software, not a car using the cents per kilometre method etc); and
  • Cost Threshold (i.e. element 1 &/or 2 of cost) is > $1,000 if holder is a Small Business Entity; or > $10,000 if holder is not an Small Business Entity

If required, to satisfy the Cost Threshold group:

  • Element 1 and/or 2 cost for a single asset of > 2 joint owners and/or > 2 income years; or
  • Element 1 and/or 2 cost of multiple assets which are a set or identical/substantially identical.

Sounds complicated?  Best suggestion – provide as much information as seems relevant to your accountant/tax agent.



22nd-January-2011