FEDERAL BUDGET: Hefty tax break for small business

There will be a 50 per cent tax deduction for spending on capital assets, expanding a previous scheme that offered business owners a 30 per cent tax break.

The change means business owners can claim a "bonus" deduction on new capital assets bought for more than $1000. Eligible spending could include computers, cars or upgrades to equipment.

For example, a builder who buys a ute for $30,000 will be able to deduct $15,000 from his income. This compares with a deduction of $9000 previously.

The benefit applies to assets bought between December 2008 and the end of this year.

The incentive is an attempt to prop up a precipitous fall in business investment, regarded a key driver of growth in the economy and jobs. Business investment is expected to fall 2.5 per cent this financial year and not recover until 2010-11.

Businesses with turnover of less than $2 million will be able to use the benefit, which will cost the Government $141 million in lost revenue.

Small businesses, described by Treasurer Wayne Swan as the "backbone of the economy", are responsible for about half of all private-sector jobs.

Lobby groups for the sector have said the global financial crisis is crippling some small businesses because banks have tightened lending standards.

In another budget measure, the Government will open a $10 million small business support line to help business owners cope with the recession. The services offered could include advice on securing finance, managing cash flow, and leasing retail premises.