SMEs warned to install equipment before December 31 to claim investment-allowance tax break

Businesses are being urged to quickly throw together some proof they have installed any plant or equipment purchased under the Federal Government investment allowance scheme so they don’t get hammered by the Australian Taxation Office.

The warning comes as the deadline looms for actually installing the equipment purchased under the scheme, with SMEs told they must have that equipment ready for use by December 31 or they may face penalties.

Institute of Chartered Accountants tax counsel Yasser El-Ansary says businesses can use any type of proof, whether it be a photograph or some type of documentation, that the equipment is actually ready for use.

“The ATO is now trying to remind all of these small businesses of their requirements. That is, businesses that made investments in new plant and equipment that want to benefit from the original deduction, need to have it installed and ready.”

“They don’t want to get into a situation where they find that during the case of an ATO review, they won’t get the benefit because they didn’t have it ready.”

This also means that companies which purchased vehicles under the scheme must have actually used them before December 31. Computers must also be ready for use, while any manufacturing equipment needs to be installed and operational.

But El-Ansary says the nature of installation depends on the equipment itself, so businesses will need to think carefully about what it means to have some equipment “ready for use”.

“It really does depend on the equipment, because such a wide range of things were available under the scheme and they didn’t give many restrictions at all.”

“Remember the Government allowed businesses to buy pretty much anything, and it was intended to be a fairly wide-ranging initiative. So there is no one rule for installing all of this equipment, only that it must be ready and available for use.”

El-Ansary warns that not only will businesses which haven’t installed the equipment properly miss out on the tax break, businesses that don’t install the equipment and then claim a deduction may be caught out by the ATO.

He says maintaining a record of “clear evidence” is the best method for preparing for the deadline.

“There needs to be clear evidence of that equipment kept on file. So, for instance, that could be an asset register, it could a photograph or any other type of documentary evidence that the assets were installed, were in fact ready for use.”

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