Software odd exclusion from SME tax break

By: Graham Gardiner


The Federal Government’s investment allowance does not apply to software and other intangible assets notes, professional services firm Deloitte reveals. The

The Federal Government’s investment allowance does not apply to software and other intangible assets notes, professional services firm Deloitte reveals.

The firm warns this "odd exclusion" will cause confusion, particularly with the acquisition of combined assets.

"Investments in intangible assets are almost as common as tangibles in the 21st century," says Deloitte Tax Partner David Pring.

"Taxpayers buy assets such as cars with in-built navigation systems and medical equipments with customised software.

"More clarification is required if they will be subjected to separate out intangible components from the tangible parts.

"This is particularly important where the main asset is not capable of being used in isolation to its intangible elements."

While the rules exclude investment allowance for intangible assets, they are not clear on "combined assets", Pring says.

"For example, Mark owns a small business entity and buys a computer with in-built software for $1,200 on May 31, 2009, for business use. It would appear that he qualifies for the investment allowance as his investment exceeds $1,000.

"It is unclear, however, if Mark should exclude a notional cost of software for calculating the $1,000 threshold.

"There is no reason why the allowance should not be expanded to intangible assets, a 21st century flavour is required for the investment allowance rules to avoid a bitter after-taste."

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