Finlease (Australia) reports that Investment Allowances offer a truly unique opportunity for business which hasn’t been offered for 20 years.
The fact that the Investment Allowances are running their full course until December, whilst other government stimulus measures have recently been wound back, is significant.
The deadline to complete purchases or at least place orders is 31 December 2009, which should signal a need for urgency. But smart business operators will be looking further ahead than that.
Key economic data is pointing to better than expected trading conditions ahead, according to economic research supplied to finance broker Finlease. The jobless figure released early October showed a drop to 5.7%, whereas many economists had actually predicted an unemployment increase. Various economic reports from the major banks indicate a strengthening Australian economy with business and consumer confidence up significantly. Inventory levels of manufacturers reduced slightly in the June quarter, due in part to increased consumer spending.
The Investment Allowances come at an opportune time for businesses looking to increase their capabilities. For businesses turning over below $2M, the Investment Allowance is a significant 50%. This is a one off tax deduction on top of what you can already claim on various assets. For businesses turning over $2M and above, there was the 30% Investment Allowance earlier this year. There is now an extended 2nd chance with a 31 December 2009 deadline extension providing an Investment Allowance of 10%.
Eligible purchases include new and demonstrator vehicles and equipment, even major upgrades of existing equipment. If you meet the order or purchase deadline of 31 December this year, remember that equipment must be installed and ready for use by 31 December, 2010. For those $2m or more businesses that have already placed their order by 30 June 2009, the equipment must be installed and ready for use by 30 June 2010 to qualify for the initial 30% allowance.
Urgent action is also required as interest rates have just risen a quarter of a percent, with the RBA tipping that more increases are on their way. So the sooner finance requirements are locked in, the better off the business will be long term.
Mark O’Donoghue of Finlease warns, “The only option is a Chattel Mortgage where you become the owner of the asset from day one. If you were to fund your purchase with a Lease or Commercial Hire Purchase (CHP) you run the risk of having your investment allowance claim denied.”
It’s been 20 years since there has been an opportunity like this so businesses are urged to take advantage of these Investment Allowances now.