Whatever will be, will be

Friday, March 06, 2009

Federal Treasurer Wayne Swan announced a $2.7 billion tax break in the first week of February this year, in what at first glance, may have seemed like a magnanimous gesture to Australian businesses.

A quick read would have had you salivating at the thought of claiming a 30 per cent tax deduction on the purchase of a new tractor or header, provided you ordered it between December 13, 2008 and June 30, 2009.


Then you remember that in December Mr Swan announced a temporary 10 per cent tax deduction (See Bang the Drum On Investment Allowance, eFarming archives, January 27).

Quickly re-reading his latest investment gift, you discover the word “additional” in front of “30 per cent”.

“It’s a no brainer. Now you can claim a 40 per cent investment allowance in your next tax return for the said equipment you ordered within the specified dates.

Mr Swan even provides two examples, one of which applies to businesses with turnover of more than two million dollars a year.
A business that buys and take possession of a $60,000 backhoe by the end of June 20099, can claim an additional $18,000 deduction in its 2008-09 tax return.

Too good to be true?

eFarming is starting to think so after canvassing a range of professional opinions.

What came out of the mix of interviews was a mix of interpretations on what exactly Mr Swan meant.

Don’t read what he said as literal, we were told:“It’s really only 30 per cent and takes the place of the 10pc announcement” (Mr Swan doesn’t say that in his joint media release with the Prime Minister and Minister for Small Business).

“Yes, you’re right, it’s 40pc as I read it” (Somebody who thinks like us).
“Beware the fine details. I think it (30pc) is an accelerated depreciation (Despite the wording in the detailed information sheet which refers to the 30pc as a deduction, “in addition to the usual depreciating deduction in respect of the asset”.

After giving his example of buying and taking possession of the backhoe, he then says that if you acquire the eligible asset between December 13, 2008 and June 30, 2009, it must be “installed” by June 2010.
How could such a well thought out plan by Treasury be so confusing?
Forgive our trace of cynicism.

To add to what is rapidly becoming a hot topic in the farm mechanisation industry, the latest missive on the subject comes from the Tractor and Machinery Association which says the 30pc announcement also applies to used machinery because Mr Swan doesn’t specify new as in NEW.

He says: “Assets eligible for the allowance are new tangible depreciating assets and new expenditure on existing assets used in carrying on a business for which a deduction is available under the core provisions of Division 40 (Capital Allowance) in the Income Tax Assessment Act 1997.”

We are unable to pass onto you what “core provisions” means but again from reading Mr Swan’s document, we are starting to understand the confusion.
Still, it makes for a great conversation piece.

But if you’re a salesman, you’ve probably already been advised to say nothing, except politely tell farmers looking for a great deal, to speak with their tax accountant first.

If it’s all too hard for you, Mr Swan says that if you miss the June 30 deadline for the 30pc whatever in this financial year, you can claim a 10pc whatever next financial year.