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Guide for Small and General Business on the Investment Allowance

by Acceptance Finance

(Archived)
Wednesday, February 24th 2010, 15:34 GMT+11:00
Australia

In June last year, the Australian Taxation Office (ATO)  issued a Guide to set out its view on certain aspects of the tax break for new investment in eligible equipment, commonly referred to as the Investment Allowance.

To be eligible for this tax break, an “investment commitment” in an eligible asset must have been made between 13 December 2008 and 31 December 2009, although delivery, installation and first use may be after that time.

The ATO makes it clear that the investment commitment time may be determined by the financing contract used. For example, the ATO stipulates that where a commercial hire purchase agreement is entered into to finance the acquisition of the eligible goods, the investment commitment time is when the hire purchase agreement is entered into, not when the order is placed with the supplier.

This ATO Guide also contains a statement about the investment commitment time where the financing of the acquisition of eligible goods is by chattel mortgage. It provides that:

• if the chattel mortgage is a “legal chattel mortgage”, then the investment commitment time is the time when the chattel mortgage is entered into and not when the order contract is made; and
• if the chattel mortgage is an “equitable chattel mortgage” which operates only by way of charge over the assets (so that the taxpayer remains the legal owner of the assets), then the investment commitment time is when the taxpayer enters into the order contract with the supplier.

The distinction between a “legal chattel mortgage” and an “equitable chattel mortgage” is highly technical. However, it may have a significant impact where eligible assets are ordered in 2009 but delivered in 2010.

Make sure you have the correct finance contract before you sign it. Don’t risk missing out on the investment allowance!

For further information please contact our Leasing Manager, Giulia Polizzi on phone 9854 3556 or email gpolizzi@acceptancefinance.com.au

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