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Edited version of private ruling

Authorisation Number: 1011647671791

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Ruling

Subject: Small business 50% tax break

Will the expenditure on the asset qualify for the 50% deduction available under Division 41 of the Income Tax Assessment Act 1997 (ITAA 1997) if the asset is registered after 31 December 2010?

No.

This ruling applies for the following periods:

1 July 2010 - 30 June 2011

The scheme commences on:

1 July 2009

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are a partnership carrying on a business.

You placed an order for an asset with an overseas supplier prior to 31 December 2009.

In negotiating the contract with the supplier you sought assurance that the asset would be delivered well before 31 December 2010 as you intended to claim the small business 50% tax break.

The supplier provided written correspondence stating the preliminary delivery date would be September 2010.

By September 2010 you had no confirmed delivery date. One of the partners travelled overseas to check on the building progress and found the asset was only partially complete.

The supplier provided written correspondence stating the asset would be delivered in time allowing for registration and delivery by 31 December 2010.

On the basis of the information available to you it now appears probable that the asset could get delivered prior to 31 December 2010 and registered in the first or second week of January 2011.

You have done what is within your power to ensure you meet the conditions to qualify for the small business 50% tax break.

Relevant legislative provisions

Income Tax Assessment Act 1997 Paragraph 41-20(1)(c)

Reasons for decision

The small business tax break

Under the Tax Laws Amendment (Small Business and General Business Tax Break) Act 2009 a deduction is available for eligible expenditure on new investment in tangible, depreciating assets.

Small business entities are able to claim a bonus tax deduction of 50% (the tax break) for eligible assets costing $1,000 or more (exclusive of GST) that they commit to investing in within the investment commitment time and first use the asset by the required period.

Under paragraph 41-20(1)(c) of the ITAA 1997 the small business entity must first use the asset or have it installed ready for use, on or before 31 December 2010.

The Revised Explanatory Memorandum to Tax Laws Amendment (Small Business and General Business Tax Break) Bill 2009 at paragraph 1.114 notes 'for each new investment in an eligible asset, this first use time needs to occur on or before 31 December 2010 for the amount to be a recognised new investment amount'.

Application to your circumstances

In order to use the asset or hold it ready for use in your business you need to take delivery of the asset and have it registered. You do not expect to have the asset registered by 31 December 2010. This would mean the first use time requirement under paragraph 41-20(1)(c) of the ITAA 1997 would not be satisfied.

It is noted that you have set out circumstances beyond your control, however, the Commissioner does not have any power to exercise discretion to extend the time period under paragraph 41-20(1)(c) of the ITAA 1997. You cannot claim the tax break for this expenditure if the asset is registered after 31 December 2010.

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