I am a new business earning a small income of around $32,000 per annum.
With my tax being approximately $6000, my write-off expenses are already around $5000, so that only leaves a $1000 in tax I have to pay. Is it worth me getting a new vehicle worth, say $38,000? And over how many years will I get the rebate?
You need to talk to your own accountant to complete specific tax calculations. The figures you have provided would not allow me to complete the tax estimates with certainty.
But the issue you have raised is a good one. There are two things to remember about the investment allowance. Firstly, it creates a tax deduction. It is not a tax rebate. The true value of the tax deduction depends on your marginal tax rate.
As an example, if you are on a 30 cent in the dollar marginal tax rate then the cash value of the investment allowance will be 30% of the tax deduction. So the lower your marginal tax rate, the less actual return you get from the investment allowance.
The second point is that where the investment allowance creates a tax loss this can be carried forward to be written off against the income of future years. Have your accountant calculate your actual benefit from an investment allowance deduction. That is the best way to assess whether it is a good option for you.
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James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
