The Australian government has announced that the instant asset tax write-off threshold has officially increased from $30,000 to $150,000 to help minimise the economic impact of Covid-19. Take advantage of the recently increased instant asset write off until June 30th, 2020. The incentive is expected to revert back to $1,000 on July 1st 2020.
Previously, the incentive gave businesses a $30,000 instant car tax reduction. This has now been increased to a threshold of $150,000 and covers all businesses with an aggregated turnover of up to $500 million per annum (previously $50 million) It’s the ultimate business tax deduction for buying a car for business.
The best part is that you can instantly claim! There’s no need to wait until the end of the financial year to claim your car tax deduction. Any company with a turnover of up to $500 million can benefit from the new asset tax write-off scheme that was introduced in April of 2019.
Keep reading to discover how the new $150,000 car tax deduction works.
$150,000 Tax Write Off Explained
The $150,000 instant write-off decreases your payable tax on business-related purchases and is a temporary increase expected to last until June 30th 2020. The increased amount is designed to help keep the Australian economy and small to medium-sized businesses afloat during the coronavirus pandemic.
This means you can spend up to $150,000 on assets, enabling your taxable income to be reduced by the same amount! The threshold is calculated per asset valued under $150,000 making it possible to instantly write off multiple assets.
Cars (along with other assets, such as work tools and equipment) decrease in value over time. You can usually claim a percentage of this cost each year for depreciation. Please keep in mind that a business can only claim $57,581 due to the depreciation car cost limit. However, with the instant asset write-off scheme, you can instantly claim your car tax deduction.
Why should you care?
The scheme has been modified to help ease the impact that coronavirus is currently having on the economy. It will enable businesses to continue making purchases, injecting cash into the economy which is then written off as a business asset.
Previously, businesses with an aggregated annual turnover of more than $50 million were unable to take advantage of IAWO. The increase will enable a further 5,300 Australian businesses to access the scheme.
Thousands of Australian’s don’t even know about the scheme, which is exactly why only an average of $10,000 is claimed. 78% of Small Medium Enterprises don’t fully understand what the small business tax incentive even entails.
This is the perfect time to purchase assets that are necessary for your business’ growth and survival. Booth’s Motor Group is determined to help you make the most out of the scheme!
Instant asset write off example
Take advantage of the small business tax incentive scheme and purchase a car and/or multiple work vehicles! At the same time, you’re able to reduce your taxable income.
The total value of the car needs to be less than $150,000. Take for example the 2019 Hyundai i30 GO manual hatch. With a price tag from $20,990, this particular model would be eligible for a car tax reduction. If you were to use it 80% of the time for business purposes, then you could claim $16,792 off your taxable income.
Another example would be purchasing the MR Triton GLX 4x2 cab chassis 2.4L for $23,900. If you were to use it 100% of the time for business purposes, you could claim back the full amount.
You could even buy two, three, or more cars and benefit from each individual purchase. However, if the car costs more than $150,000, then you can’t be immediately deducted. However, you can continue to deduct them over time using the small business pool. If you’re unsure on what you can claim please get in touch with your accredited accountant.
- Hyundai Elantra Sport, Active & Go
- Hyundai Kona Highlander, Go 2.0, Active & Elite
- Hyundai Santa Fe Elite, Active & Highlander
- Hyundai Tucson Active, Active X, Elite & Highlander
- Hyundai Veloster, Turbo Premium, 1 & 2
- Hyundai Venue Active, Go & Elite
- Hyundai i30 & i30N – N Line, Active, Go, Elite & Premium
- Mitsubishi ASX – ES, LS, Exceed, MR & GSR,
- Mitsubishi Eclipse Cross – ES, LS, Sport, Black Edition & Exceed
- Mitsubishi Mirage – ES, LS & Black Edition
- Mitsubishi Outlander / PHEV – ES, Black Edition, LS & Exceed
- Mitsubishi Pajero – GLX & GLS
- Mitsubishi Pajero Sport – GLX, GLS, Black Edition & Exceed
- Mitsubishi Triton – GLX, GLX-R, GLX+, GLS & GSR
- Ford EcoSport – Trend, Titanium & Ambiente
- Ford Endura – Trend, ST-Line & Titanium
- Ford Escape – Ambiente, Trend, ST-Line & Titanium
- Ford Everest – Trend, Sport, Titanium & Ambiente
- Ford Focus – Trend, ST-Line, Active & Titanium
- Ford Ranger – XLS, XLT, Wildtrk, XL, XLS & FX4 Special Edition
- Ford Transit Custom Van – 340S, 340L, Sport & 300S
Tax deduction for buying a car for business guide
Here’s how you can make sure you’re making the most out of the small business tax incentive:
- Purchase your work vehicle before the 30th of June 2020 to instantly claim the $150,000 instant tax write off.
- This is the perfect opportunity to buy a car for your small business. From the 1st of July 2020, the threshold will revert back to $1,000 for small businesses.
- Although you have to pay up-front, you’ll be decreasing your taxable income by the same amount. Alternatively, a short-term low-interest car loan will ensure that you won’t miss out on this tax deduction for buying a car for business.
Is your business eligible for a car tax deduction?
When the scheme was introduced, it was only available to businesses with an annual turnover of up to $2 million. Recently this changed to be more inclusive of larger businesses. The $150,000 instant tax write off is now available to businesses with an annual turnover of up to $500 million.
Essentially, if your business sells less than $500 million, then you’re good to go. You can claim the instant write-off right now! As long as the total value of the asset(s) is less than $150,000.
However, if you’re not using the car solely for business purposes, you can’t deduct the full cost. Keep this in mind as it could potentially throw you off when calculating costs. Only the business proportion is instantly deductible, whereas the personal proportion isn’t.
What assets are eligible for the IAWO $150,00 tax write off?
Needless to say, assets that are claimed as part of the scheme can be new or used. Depending on your business, there are thousands of items that could be eligible for the scheme. It’s best to speak with a tax accountant for the full list of all eligible assets for your business. The Australian Taxation Office website has some more information on the general depreciation rules
According to the ATO, the $150,000 instant asset write-off ‘applies to assets costing less than $1500,000 each purchased and used or installed ready for use from the time of announcement until the 30th June 2020.’ Eligible assets include work vehicles, so make the most of the government’s car tax deduction today.
If you’re unsure whether you meet the criteria for the small business tax incentive, please contact your local accountant.
Buying a vehicle for your small business.
Such amazing opportunities don’t come often. Make sure you buy your next car before the 30th of June 2020 to benefit from this massive economy-boosting $150,000 car tax reduction. Visit our website today to learn more about Booth’s Motor Group’s special offers, like our Red Hot Web Deals!
Booth’s Motor Group and its associated companies do not provide tax, legal or accounting advice. This material has been prepared for information purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.