Looming deadline for investment allowance

December is the traditional month for giving and receiving. This year, December also marks the final month buyers can take advantage of the federal government's small business investment allowance.

Businesses turning over less than $2 million a year are in a position to claim a 50 per cent bonus tax deduction on any item costing more than $1000 to purchase, provided it meets the standard pre-requisites for eligibility, as laid down by the Australian Taxation Office (ATO) and the contract to purchase is signed before midnight of December 31.

A similar stimulus for big business earlier this year has been attributed with an upturn in automotive sales this year, following the setback of the Global Financial Crisis.

In a press release today, David Purchase, Executive Director of the Victorian Automobile Chamber of Commerce (VACC), has offered a timely reminder to small-business buyers to get in for their chop, before the incentive expires at the end of the month.

"This incentive scheme is particularly relevant to all business owners considering up-grading their vehicle or fleet," said Purchase (pictured).

"Here is an example of how the Small Business tax break could benefit a business. A commercial vehicle or company car has clocked up the k's, the business has expanded so the vehicle is no longer suitable and it lacks today's modern safety features.

"As a Small Business owner, you could put pen to paper on a new diesel van, costing $35,000 before New Year's Eve, and have it delivered and paid for in full, in February 2010. The purchase would be included on your 2009-10 tax return and would be eligible for a $17500 tax deduction.

"VACC is promoting this Federal Government scheme to Small Business owners, because it is a fantastic opportunity which makes good business sense. The stimulus package is a genuine chance to invest in the business and invest in employees and clients."

The stimulus packages have been welcomed by automotive importers and manufacturers. Different car company executives have declared the government's initiatives have been influential in the market's comeback during the second half of this year.

Ford President Marin Burela, during the last monthly sales briefing, tacitly credited the stimulus package with the likely upturn in sales for the final months of this year, when he referred to sales being pulled forward into the final quarter of 2009.

"We're the first economy to see these sort of movements and rebounds, happening in a very positive way," he said in reflection of the Australian economy's strong performance in the aftermath of the Global Financial Crisis. "The auto industry has clearly been a beneficiary of the confidence that's slowly starting to develop."

Over at Mazda, one of the success stories among importers this year, National Sales Manager David Hughes also sees sales picking up in the last quarter of 2009. Hughes, speaking during the press conference for the Mazda3 Diesel, rolled out graphs of market research to show the economy was picking up and that was reflected in improving sales of new cars. He pointed out a blip in June, which was "on the back of the investment allowance".

"Confidence has now climbed back to levels seen in 2007," he announced. "The consumers' outlook for the economic conditions in the next 12 months... is also back to levels seen in 2007 and feelings about economic conditions in the next five years... are now at a 10-year high. The vehicle market is trying to recover..."

With VFACTS figures for November due out on Thursday, the entire market is anticipating an upswing in sales, which will carry through December as well -- specifically as a consequence of the small business investment allowance.

The danger is that the industry, still smarting from the Global Financial Crisis, won't have the necessary inventory to support suddenly improving retail fortunes. So it appears to be a case of get in for the car you want, while you can. Leave it too late and you'll be faced with two choices: buy a car that's not quite the right specification but subject to the tax allowance, or get the exact car you want but no bonus tax deduction.

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