Private ruling: Small business tax break
Published: June 2012
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Is the company entitled to the 50% small business tax break? | A1: No.

Relevant facts and circumstances: The company decided to purchase a new asset. It was anticipated that the company would take advantage of the 50% small business tax break. Finance was sought from a finance company and approved in the 2009-10 income year. The finance company subsequently withdrew their finance approval without providing any reason for doing so. The company then sought finance through another finance company which was approved in the 2009-10 income year. Loan documents were signed in the 2010-11 income year. Due to the delays in finance, the new equipment was delivered after 31 December 2010, at which point it was installed and ready for use.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 41 | Income Tax Assessment Act 1997 Section 41-20 | Income Tax Assessment Act 1997 Section 41-30

Reasons for decision: Summary: Under Division 41 of the Income Tax Assessment Act 1997 (ITAA 1997) a deduction is available for eligible expenditure on new investment in tangible, depreciating assets for certain entities. Small business entities are able to claim a 50% bonus tax deduction for eligible assets costing $1,000 or more where they: · commit to investing in the asset between 13 December 2008 and 31 December 2009, and · start to use the asset, or have it installed ready for use, by 31 December 2010 (first use date). There is no provision in the legislation to allow the Commissioner discretion to allow an extension to the required 'first use date' beyond 31 December 2010. The company intended to purchase a new asset and sought to obtain finance in the 2009-10 income year. Due to delays in finance approvals, the asset was not installed ready for use until after 31 December 2010. As the asset was not used or installed ready for use prior to 31 December 2010 the company does not satisfy the conditions contained in section 41-20 of the ITAA 1997. Accordingly, the company is not entitled to claim a deduction under the small business tax break.

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