The announcement of the Federal Government’s extension of the instant asset write-off scheme is good news for new car buyers, many who are having to extend their wait time due to acute new car stock shortages in Australia with most brands.
The instant asset write-off is applicable to motor vehicles valued up to $59,136 (in the 2020-2021 financial year), the threshold being well below the Luxury Car Tax threshold of $68,740. The previous financial year threshold was $57,581.
The tax incentive is now formally known as the “temporary full expensing scheme”, though many in the car and accounting industries refer to it as an instant asset write-off.
Any business with a total income of less than $5 billion can deduct the full cost of eligible depreciable assets of any value, if acquired from October 6, 2020 and first used or installed ready for use in 30 June, 2023. The 12-month extension will provide eligible businesses with more time to secure the tax break and find a vehicle in a tight market.
According to our in-house accountant, Kevin Dang from Jtax Essendon, the extension of temporary full expensing continues to encourage businesses to make investment decisions and the best reason to invest in any new asset is knowing that your business will benefit from a commercial return. Rules apply to businesses with an annual turnover up to $500 million and the value of the purchased asset has a cap of $150,000.
If you’re operating a business that has a turnover of between $500 million and $5 billion you’re not actually able to purchase a second-hand asset to be eligible, though you can purchase something new without any cap on the cost.
All businesses with a turnover up to $5 billion can additionally make improvements to existing assets and these improvement costs are also able to be instantly written off.
And as tax time approaches it’s timely to emphasize that you can claim a lot of expenses on your work-related vehicles. Kevin emphasizes that “some of the items include petrol and oil, registration, servicing and repair costs, car insurance, interest on your car loan, lease payments (if you are leasing your vehicle) and depreciation (its decline in value over time).”
The extension of the ‘instant asset write-off’ measure until 30 June 2023 provides ABN holders the confidence to invest in new vehicles and equipment. Expect bumper sales of commercial vehicles and utes over the next 25 months. Talk to the team at Dealer Finance Group for more information on the current market and opportunities within our dealer network.