Guide to small business and general business tax break

Warning: This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

Calculating the bonus deduction

The tax break provides a bonus tax deduction - that is, you can use the tax break to reduce your assessable income for a particular income year. The amount of the tax break is not refundable and does not in itself lead directly to a cash payment to you.

To the extent that you are in a tax loss situation for the income year in which you claim the tax break, the bonus deduction will form part of that loss.

Small business entities

If you are a small business entity, then only the 50% rate is relevant. If you are eligible for the lower threshold in an income year, you will be able to deduct 50% of your 'recognised new investment amounts' in relation to an asset for that income year.

Example

Ben operates a courier service. He orders and takes delivery of a new, more fuel-efficient, delivery van on 25 June 2009 at a cost of $30,000.

The van is a tangible, depreciating asset for which a deduction is available under section 40-25.

Ben's investment in the van has an investment commitment time of 25 June 2009 which is between 13 December 2008 and 31 December 2009.

Ben's first use time in relation to the van is also 25 June 2009 which is before the deadline of 31 December 2010.

This gives Ben a recognised new investment amount in relation to the van of $30,000 for the 2008-09 income year.

In 2007-08 Ben was carrying on a business and his aggregated turnover was less than $2 million and it is likely to be less than $2 million again in 2008-09.

Ben's new investment threshold is $1,000, which his investment in the van clearly exceeds.

Ben has satisfied all of the eligibility criteria that apply to him and can claim the tax break at the 50% rate. He can claim a bonus deduction of $15,000 in his 2008-09 tax return.

All other taxpayers

For the 2008-09 income year, the only bonus deductions able to be claimed by you if you are not a small business entity will be at the 30% rate.

Only the investment commitment time is relevant to working out if you are entitled to the 30% rate in 2009-10, as you would need to have put the asset to use prior to 1 July 2009 in order to be entitled to a deduction in relation to the asset under section 40-25 (and hence to the tax break).

It is possible for you to have multiple claims in relation to an asset at two different rates in the 2009-10 income year.

If you:

undertake new investment in an eligible asset between 13 December 2008 and 30 June 2009
have recognised new investment amounts with an investment commitment time between 13 December 2008 and 30 June 2009 that exceed the relevant threshold, and
first use the asset in the 2009-10 income year,

you would be able to claim the tax break on those amounts at the 30% rate as part of your 2009-10 income tax return.

If:

you then also undertake new investment in the same asset after 30 June 2009, and
the asset was brought to its modified state in the 2009-10 income year,

then you would also be able to claim the tax break on those amounts at the 10% rate as part of your 2009-10 income tax return.

For the 2010-11 and 2011-12 income years, only bonus deductions at the 10% rate will be able to be claimed. If you are claiming the tax break in the 2010-11 year you will not have installed eligible assets or have modified assets in time to access a deduction at the 30% rate.

If you have an investment commitment time between 13 December 2008 and 30 June 2009 and first use time after 30 June 2010 you do not meet the criteria to claim the tax break at the 30% rate. However, provided the first use time is on or before 31 December 2010, you will be able to claim the tax break at the 10% rate.

Example

Frank's investment in his oven was as follows:

Investment commitment time = 29 June 2009
First use time = 17 August 2009
Recognised new investment amount = $15,000

For 2009-10, Frank can claim the tax break at the 30% rate. His bonus deduction is $5,000 for the 2009-10 income year.

Gail will not be eligible for the 30% rate. Gail's investment in her oven was as follows:

Investment commitment time = 10 August 2009
First use time = 17 August 2009
Recognised new investment amounts = $15,000 ($14,500 + $500)

Gail's bonus deduction will be $1,500 for the 2009-10 income year.

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Last Modified: Tuesday, 1 September 2009