Uncategorized

Fanfare unfair

In its May 12 budget, the government announced it would increase the tax deduction from 30% to 50%. It also extended the period small businesses had to make their investment decision from June 30 to December 31. That is just to make the investment decision. The business would then be required to have the equipment in place by December 31, 2010. But there are a couple of catches. Firstly the legislation necessary to make the tax deduction a reality has not even passed the lower house of Parliament yet. There are concerns this could become another alcopops situation where the government puts a policy in place and then fails to get the legislation up.The second issue is that most small businesses will struggle to get finance.For the purposes of this tax break, a small business is classed as one with an annual turnover less than $2 million. In the contracting game this equates to a sole operator with an excavator or skid steer loader and a truck. It will need to make a minimum $1000 investment to qualify.Businesses with greater turnovers can still get a 30% deduction for any purchase decisions made before June 30, and 10% for any decisions taken between July 1 and December 31. They will have to agree to spend $10,000 or more.Another change to the tax deduction is that businesses will be able to aggregate their investment in batches of identical assets to help them meet the $1000 or $10,000 thresholds.Construction and Mining Equipment Industry Group executive officer John Reid said access to finance would be a major stumbling block for businesses trying to take advantage of the tax deduction.“The feedback I’m getting from small contractors is that they are finding it very hard to raise funds,” he said.Accountants also are finding it hard to advise their clients on the tax deduction because there is no legislation in place.While the government’s failure to get its alcopops legislation through the senate was an extreme example, it has set a worrying precedent.The initial legislation governing the tax breaks was introduced to Parliament on December 13. As at May 13 it was not even through the lower house and there are less than 50 days until June 30.The federal Opposition is understood to be in favour of the investment tax deduction so that should help smooth its path through the respective houses.Deloitte tax partner David Pring said he believed the tax deduction was a good initiative but also has misgivings over the lack of any legislation to back it up.

Send this to a friend