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Tax breaks a boon if approved … quickly

While the package as a whole is yet to pass through the Senate, industry groups have responded positively to the proposal. “As far as our industry is concerned, it would be a tremendous boost,” Construction and Mining Equipment Industry Group executive officer John Reid told CIN. “On a straight-line depreciation schedule, a $200,000 machine that has an effective life of 10 years gives you $20,000 per year. “If, on top of that, you can claim another $60,000 in that first year, that is a victory as far as the purchaser is concerned,” Reid said. “One of the things we see as being a major drawback for the small contractor who is purchasing new equipment, is the ability to get finance,” he said. “A lot of the major finance companies that used to be in that area have pulled out of it.” If a small contractor is able to claim such an increased deduction in the first year, then it gives him a much stronger case to take to the bank, finance company or whoever it might be, Reid said. CCF backs tax breaks, but … The Civil Contractors Federation has also backed the proposed tax break, saying its members would benefit from the initiative, which is restricted to businesses turning over less than $2 million per year. “As an initiative, it will provide assistance,” CCF national chief executive Chris White told CIN. “But obviously they’re looking at the whole of all industries instead of just picking out one. “Our industry is a bit different because there’s a high capital cost, and therefore a lot of our [member] organisations would be outside the limits they have put on, but it will certainly be of benefit to our smaller members,” he said. White urged the government to expedite the process of rolling out the economic stimulus package as a whole. “The strong message that’s right around our industry, is in relation to getting the work to tender,” White told CIN. “We’ve got the federal government allocating funds to various road programs. They pass it over to the states and what we’re not seeing is the works going to tender,” he said. White said the main problem was an unacceptable delay between when governments commit to the funds, and when the funds are made available and the tender stage is reached. “What we’re saying is funds from the stimulus package need to hit the ground rapidly,” White said. Who can get it According to Perth-based business finance specialist Ledge Finance, the 30% deduction can be claimed for assets acquired, ordered or construction started between December 13, 2008 and June 30, 2009 – provided the assets are installed and ready for use by June 30, 2010. Qualifying assets acquired, ordered or construction commenced between July 1 and December 31 this year will attract a 10% deduction – in addition to allowable depreciation – provided they are installed and ready for use by December 31, 2010. But Peter Bergshoeff, Ledge’s general manager, sale and distribution, told CIN that while the deduction was a good thing, it was early days yet, given the stimulus package is still yet to pass through Parliament. “A lot of the people out there who have deferred investment decisions and this may make it attractive for them to go ahead now, given – if the legislation goes through – they’ll get it back pretty quickly,” Bergshoeff said. Perhaps the most significant restriction on businesses seeking to access the deduction is that companies must have a turnover of $2 million a year or less. According to Ledge, the federal Treasury advises that assets eligible for the allowance are new tangible depreciating assets and new expenditure on existing assets used for carrying on a business for which a deduction is available under the core provisions of division 40 (capital allowances) of the Income Tax Assessment Act 1997. This excludes land and trading stock from the definition of depreciating assets, and will not qualify for the deduction. In an example given by Ledge, a larger business which purchases and takes possession of a $60,000 backhoe by June 30 this year can claim an extra tax deduction of $18,000. When lodging its 2008-09 income tax return, the business will be able to claim this deduction in addition to the usual depreciation deduction for the asset. If the business had delayed this investment until after June 30, 2009 – for example, until September 1, 2009 – and had it installed, ready for use before the end of December 2010, the 10% rate would apply. It would be able to claim a deduction of $6000.

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