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Small business tax break

The 50% tax deduction for small businesses (turnover under $2 million) announced in the Federal Budget has now been given royal assent so it is law. That means, eligible purchases over $1,000 can be added to your tax return as a 50% deduction.

Note that this is a bonus as you can still claim any depreciation and deductions you would otherwise be entitled to.

So if a purchase was already something you had planned this year (the deadline is 31 December 2009) it’s great news; if a purchase was a possibility or planned for early next year, considering buying it now is now more affordable. However, if cashflow is a problem and/or you don’t really need any $1,000 purchases, forget the tax break and spend your money elsewhere!

Is this tax deduction affecting your spending?

I am about ready to upgrade my computer so this tax break could be well timed for me – yes I could buy a computer for under $1,000 anyway but I want reliability, a large screen and various features (such as mobility, i.e. a laptop) that will make life easier for me.

Government help for small business…

“Businesses in Australia – especially small businesses – are the engine of the Australian economy and deserve direct support during a global recession.”

I agree with the Treasurer that Australian business are a crucial part of our economy – and helping those businesses will therefore help the economy.

Yesterday, the Rudd Government announced a huge package to help prevent or reduce the recession for Australia. Part of the package is aimed at business, whilst the remainder is aimed at creating jobs and increasing spending.

The small business and general business tax break is described in the Treasurer’s media release and fact sheet. For most small businesses, it makes the purchase of a new computer or other eligible assets (excluding cars and trading stock) more affordable.

Great news if you need a new computer – or you sell computers!

There are of course conditions to qualify for these deductions, such as having a turnover under $2 million to qualify as a small business.

The 30% tax deduction only applies for assets greater than $1,000 which may exclude many micro businesses.  For example, an additional $300 deduction applies if you buy a $1,000 computer before the end of June 2009 – how many micro businesses would be buying a $1,000 computer unless in that industry?

However, if you are considering buying a new sewing machine, desk, computer, printer, camera, or similar, maybe the tax deduction will make it feasible for you to buy a larger and more expensive model.

How valuable do you think this tax break will be for your business? Will it impact on your buying decisions in the next few months?