Hardware suppliers to benefit from tax deductions

IT hardware suppliers stand to benefit from tax deductions for depreciation of hardware assets announced in this week's Federal Budget, according to industry bodies.

Both the AIIA and the Australian Computer Society have said an increase in the allowable depreciation rate of assets, was an added incentive for Australian businesses to invest in new plant, equipment and technology.

Rob Durie, chief executive officer AIIA said: "We welcome the tax cut for depreciation of investments which will be worth some $3.7 billion to Australian businesses over the next four years."

Stuart Osborne, corporate tax partner at accountancy firm Delloite, said hardware providers could see an uptake in sales as the higher up front tax deductions become more attractive.

“The new depreciation rate will secure deductions a lot quicker. For example a laptop computer purchased after 9 May 2006 will attract a deduction of 66 percent of its value in the first year of purchase,” he said.

As well as computing equipment, telecommunications equipment providers may also come out ahead. The effective life of a mobile according to the Commissioner is 6.67 years, with the budget bonus, the first year write off on a mobile is 30 percent (from 22.5 percent), he said.

Jeff Li, managing director at local assembler Pioneer, said with rise of federal interest rates and petrol prices, the announcement about the increase would help channel players.

“I have already had [a lot of] enquiries. A lot of dealers have been calling and asking for quotations on products. I think the government’s announcement helped bring in the traffic,” he said.

However Osbourne noted that software providers would miss out. He said, “software for use in business does not qualify for accelerated depreciation.”