What is new investment?
You must make a decision to invest either in a new asset or an existing asset between 13 December 2008 and 31 December 2009. Investment in an existing asset would include improvements or modifications to the asset.
An asset is new for the purposes of the tax break if it has never previously been used or installed ready for use either by you or another entity for any purpose, anywhere. This means that second-hand assets are not eligible for the tax break.
You are not eligible for the tax break in relation to an asset that has been previously used overseas. However, a new imported asset may qualify. An asset will also be excluded from the tax break if it has previously been used for a non-business purpose and is then converted to business use.
However, an asset will not be excluded from the tax break because you purchased it from someone who held it as trading stock or held it ready for sale.
An asset will still be considered to be new if it has only been used for the purposes of reasonable testing and trialling (by any entity).
Example
Collie Mining Company arranges to acquire a new dragline (a piece of machinery used in open cut mining) from Big Machine Company. Big Machine Company is responsible for acquiring and assembling the necessary components and then testing the dragline. After testing the dragline in operational use, the ownership is transferred to Collie Mining Company. The prior use of the dragline only amounts to reasonable testing and trialling. Consequently, if all other eligibility criteria are satisfied, Collie Mining Company is eligible to claim the tax break.
Additional investment (such as improvements or modifications) undertaken from 13 December 2008 in assets you held or entered into a contract to hold on or before 12 December 2008, however, may be eligible.
Demonstrator vehicles
A 'demonstrator' vehicle is a designated car that is held by a retail car dealer at their premises that is used to demonstrate a particular make and model of car that is their trading stock that they sell to retail customers.
A ‘demonstrator’ vehicle will be considered 'new' for tax break purposes when sold to a retail customer where the prior use of the vehicle has only been for the purposes of reasonable testing and trialling. Determining a reasonable amount of testing and trialling depends upon the facts and circumstances of each individual case. As a guide, a demonstrator vehicle will be ‘new’ where it is used for demonstration purposes for a period up to three months.
Where a tax break is sought on a demonstrator vehicle that has been used for that purpose which exceeds three months, it will turn on the particular facts and circumstances as to whether it is reasonable to conclude that the vehicle has only been used for the purposes of reasonable testing and trialling. If you require further advice regarding the eligibility of a demonstrator vehicle you may seek a private ruling from the Tax Office. See Private Rulings and Advice Essentials for more information about how to apply for a ruling.
Example
Belinda is contemplating the purchase of a ‘demonstrator’ vehicle from a dealer for $25,000 to use in her business. The car was used by the dealer for less than three months as a demonstrator. The prior use by the car dealer constitutes reasonable testing and trialling of the car. Therefore the car is considered new and Belinda may be eligible to claim the tax break for the car.
Example
Anna is deciding whether to purchase a 'demonstrator' vehicle from a rural dealer for $45,000 to use in her real estate business. The rural dealer has only been using the vehicle to demonstrate the make and model to new clients for a period of four months. Based on the particular facts and circumstances it is reasonable to conclude that the vehicle has only been used for the purposes of reasonable testing and trialling. Anna may be eligible for the tax break on this vehicle if she decides to proceed with the purchase.
Artwork
Artwork such as a painting or sculpture is considered a tangible depreciating asset for which a capital allowance deduction is available under section 40-25 of the ITAA 1997. Therefore, artwork may be eligible for the tax break if it meets the other conditions for the deduction such as it is used for the principal purpose of carrying on a business.
The artwork needs to be new. If the artwork had previously only been held as trading stock it would be regarded as new. If, however, it was purchased from someone who had used it (other than as trading stock) it would not be considered new.
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Last Modified: Tuesday, 1 September 2009
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