Do you need a new vehicle for your small business? If so, now could be an ideal time to buy one. And if you’ve not been thinking of purchasing one, it’s a good time to consider the option. For the next two years only, if your business buys a new car, van, ute or truck, it will be instantly 100% tax deductible.
Under the new scheme, which was announced in last week’s Federal Budget, small businesses with an annual turnover of less than $2 million will receive an instant asset write-off on equipment purchases of up to $20,000. It’s expected to create a boom in sale of new and used vehicles to businesses.
Although it’s obviously easier to find used vehicles in this price range, many new entry-level small cars and most light cars cost less than $20,000, reports www.motoring.com.au. Meanwhile, some new commercial vehicles are also available, although the choice is more restricted. The Ford Ranger XL Cab Chassis starts at $19,740, while the Toyota HiLux Cab Chassis can be found from $18,990.
You can purchase a new vehicle for less than $20,000 between now and 30 June, 2017, and claim an immediate tax deduction on the full amount. To qualify, your business needs to be actively trading, and demonstrating this by submitting quarterly Business Activity Statements.
Previously, if you bought a vehicle, you’d have to spread the deductions over several years, as depreciation. Instant write-offs could only be applied to purchases up to $1,000, which obviously excluded vehicles, and any other sizeable assets besides.
The Federal Government has put $1.75 billion into funding this scheme in an attempt to kick-start business investment. Coupled with a 1.5% company tax cut, it makes the next two years an excellent time to add to or upgrade your business vehicles.
The old rules still apply to assets over $20,000, which depreciate at 15% in the first income year, and 30% per year after that.
If your business is unincorporated, meaning that you operate as a sole trader, partnership or trust, you won’t be able to benefit for this measure, although you’ll receive a 5% tax discount from July 1, to a maximum of $1,000 a year.
Close to 4 million Australians claim vehicle expenses, including fuel, registration and maintenance, under their business each year, and tax concessions already amount to over $11 billion each year. It will be interesting to see how many take advantage of this latest incentive to invest.