The tax break or investment allowance was set at 30 per cent on top of any existing Australian Taxation Office allowances.

In the May Federal Budget, the BIA was upgraded to offer businesses an increased allowance rate, up to 50 per cent, and an extension of the cut-off dates (see table).

The new BIA deductions available are claimable in addition to the normal 100pc depreciation claimable over the purchased item's working life.

This, in effect, means a small business operator (farmer) can claim to 150pc of the value of new equipment under certain conditions.

Eligible assets are new, tangible assets used in carrying on a business, for which a deduction for decline in value is available under the core provisions of the Income Tax Assessment Act 1997.

Eligible assets include machinery and equipment used to produce income, including motor vehicles.

The same rules that applied originally to expenditures above the threshold, which are capitalised into an existing asset as a second element of cost, still qualify for the BIA deduction: such as buying a new front for an existing harvester.

As was the case originally, secondhand items, land and trading stock are excluded from the definition of depreciating assets, and do not qualify for any deductions.

For a farmer/buyer with taxable income and who is looking to minimise the tax element, the options in table 1 are available.

For a farmer who has tax losses or does not have a taxable income, but who qualifies for lease finance, the BIA can still be of benefit, with the allowance passed-on to the lessor/financier.

It has been estimated, for example. that the passing-on of the 50pc BIA to a lessor/financier could bring about a 3pc interest rate reduction to the lessor, from about 7-4pc.

This, of course, would need to be negotiated on a case-by-case by the lessor of the machinery and the leasing/finance company.

* More on machinery in Stock Journal, November 5 issue.