In 2015, the ATO introduced measures to widen the deduction pool to include assets of a business up to $20,000 that can be written off immediately, up from the previous $1,000 limit.
This means that you can buy nearly anything for your business from stationary to a new car, and write it off immediately for that financial year, freeing up your cash flow to put into other parts of your business.
A vehicle is just an asset in the eyes of the tax office, so you can buy pretty much anything – as long as it’s under $20,000 excluding GST, and is used solely for your business.
For example, let’s say you run a driving school. Let's say you can buy a demo manual Kia Picanto for $13,990 drive away on offer, and then claim the $1,538.90 in GST credits as a refund, to get a tax/cash saving of $3,987.15 for the financial year.
On the other hand, if you run a landscaping business, and you’ve just started advertising on the other side of town; you’ll need a ute to get around to jobs. Pick up a used Ford Ranger for $19,990, refund the $2,198.90 GST portion of the purchase, and save $5,697.15 on your tax bill.
If you want to buy a business vehicle under the benefit, it has to be under $20,000 excluding GST. This means that any vehicle invoiced with a drive away price up to $22,000 including GST can qualify for the write off.
If you want to buy more than one vehicle under the rule, you would have to invoice it separately to write it off as two or more transactions.
The accelerated depreciation rules apply to all eligible purchases until June 30, 2017.
(BDO Comment: If you have any queries in regards to the depreciation of motor vehicles for small businesses, please contact BDO who will have one of their Automotive specialists assist you. Please note this information is general in nature and should not be used as a substitute for your own professional advice. Any tax benefit that may be available will be subject to your own circumstances.)
Motorama can help with all your questions regarding finance, and get you into a vehicle that suits your business right away. See the team at your local Motorama dealership today to speak to a friendly member of the team.
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