IT asset tax breaks won't rock the boat

Vendors say business cautious during recession

The federal government is set to increase tax breaks for computer purchases, but vendors say it will not result in a boom in sales.

Under proposed changes announced in the federal budget in Canberra last night, small businesses with a turnover of less than $2 million will be able to write off 50 percent of the purchase price of assets including computer hardware, purchased within the a year from December 2008 and installed by 2010.

The changes extend a previous announcement that the government would allocate a 30 percent tax break for eligible assists bought from the six months from December last year.

Dell SMB division services business manager Kush Naidu said the tax break, set to go before federal parliament with the next two weeks, will not result in an explosion of hardware sales.

“From my experience SMBs are still resistant to spend,” Naidu said. “Some of the feedback we get that businesses are reluctant because they still need to come up with the remaining 70 percent.”

Naidu said the incentive will still be attractive to businesses and said the company previously used the government’s 30 percent asset deduction in marketing materials.

Redback Networks Australia and New Zealand country manager Ray Aguilera said the purchasing decisions of its customers, typically Internet Service Providers, are influenced by many industry issues.

“We are still mulling it over. There has been many factors playing on telcos in recent history like the NBN (National Broadband Network) and changes in regulation and services,” Aguilera said.

“I don’t know if the incentive is enough for smaller ISPs to invest given that there are bigger things happening.”

Hewlett Packard personal systems group manager Janice Cox said in an e-mail statement the tax break may be a lifeline to small companies struggling in the global financial crisis.

“This announcement is a real demonstration of support by the government for small businesses. It comes at a time of tight lending and exceptionally challenging business conditions,” Cox said.

“Through taking advantage of these tax incentives, small business will be able to invest in IT which can be an important enabler to help them deliver improved performance, productivity and efficiency. It could have a direct impact on their ability to succeed in this difficult economic climate.”

Small businesses must invest a minimum of $1000 per asset, or group of assets, to qualify for the tax break. The coalition said it will pass the legislation which in its expanded form is estimated to cost about $141 million in revenue over four years. Software will not be included in the scheme. More details are available here.

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