Tim O'Brien | May 13, 2009

The Federal Treasurer Mr Wayne Swan last night announced an increase in the investment tax break for small businesses purchasing new vehicles between 13 December 2008 and 31 December 2009.

In a move welcomed by small business groups and the motor industry, small businesses buying new vehicles will be able to claim a bonus tax deduction of up to 50 percent on the cost of these purchases – up from 30 percent previously announced as part of the Rudd Government's stimulus package.

The Federal Chamber of Automotive Industries (FCAI), said, "The Federal Government’s Budget decision to increase and extend the investment tax break for small business provides a valuable incentive for new vehicle sales.

“The tax break will help stimulate the new vehicle market and support jobs in the industry,” FCAI Chief Executive Andrew McKellar said.

For small business owners, this amounts to a significant deduction and will provide significant savings on the cost of a new vehicle. It will, as the FCAI said, be a powerful incentive to "encourage small business owners to bring forward purchasing decisions”.

Given the stalling of fleet sales that has occurred in the current market downturn, this initiative will likely put a floor under sales of commercials and vehicle purchases by the small business sector. For dealers, manufacturers and importers, this announcement will be welcome news.

It's a smart move by the Treasurer. It has the dual impact of encouraging business investment and easing pressure on the new vehicle sector, currently enduring its toughest year in fifty years.