The Australian Tax Office (ATO) has warned taxpayers against wrongfully taking advantage of the Government’s Small Business and General Business Tax Break. It has released the following “myth busters“ to help taxpayers “separate fact from friction”.

Myth ATO response
It’s too late to take advantage of the business tax break No, it’s not too late, but taxpayers do need to make a decision very soon. The deadline for buying eligible assets is 31 December 2009, and a taxpayer then needs to use or install the asset by 31 December 2010. To be eligible for the 50% bonus tax deduction, a taxpayer’s business needs to have an annual turnover of less than $2m and the asset needs to cost $1,000 or more. If the taxpayer’s business turns over $2m or more, the taxpayer can still claim a 10% tax deduction for eligible assets (costing $10,000 or more) if the taxpayer purchases them by 31 December 2009 and uses them (or installs them ready for use) by 31 December 2010. Before making any investment, taxpayers should make sure they get all the facts about how the business tax break might apply to their personal circumstances.
I can claim the tax break on any asset, including second hand items No, a taxpayer can’t – only certain assets are eligible. This includes new, tangible, depreciating assets (such as a new business vehicle) and improvements or additions a taxpayer makes to existing assets (such as a new engine for an existing business vehicle). It doesn’t include repairs or second hand goods.
I only need an ABN to qualify Wrong. Just having an ABN doesn’t mean a taxpayer is eligible. There are a number of eligibility criteria the buyer and the asset have to meet to qualify for the tax break. As a starting point, the buyer needs to be in business and the asset needs to be used principally for business purposes.
I will get cash back No. The business tax break is an extra income tax deduction, not a tax bonus, rebate or offset. A taxpayer claims this extra deduction in its income tax return.
I can buy an asset to get the tax break, then immediately sell it No. If a taxpayer buys an asset and resells it soon after it was bought, the ATO considers it’s unlikely the asset will be used in the required way, that is, “for the principal purpose of carrying on a business”. The taxpayer would therefore not be entitled to claim the tax break.
I can claim the extra deduction this financial year (2009-10) even if I don’t use the asset until next financial year (2010-11) No, a taxpayer claims the extra tax deduction in the income tax return for the year in which the taxpayer first uses or installs the asset, which in this case would be 2010-11.

Source: www.ato.gov.au

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