Good news for small business owners! You can now claim your new car’s purchase cost against your tax. That’s right. The Australian government has recently declared that small businesses can still get the instant asset tax write off for a maximum of $30,000.
The tax write-off amount has increased from the previous limit of $20,000, which means business owners now have a wider range of options when shopping for company vehicles. This updated tax benefit is available to all small businesses with revenue below $10 million per year.
How does it work?
If you’ve just bought a vehicle for business use, you can claim a tax deduction for depreciation on each of its functional years. But instead of doing so, you can offset the full depreciation with an instant asset tax-write off. It will enable your small business to claim a tax deduction for the entire vehicle depreciation cost at once.
As long as your business vehicle cost less than $30,000, you can claim this tax benefit when lodging your tax return anytime between July 1 and October 31. The car should also have been used or ready for business use during that financial year. Upon meeting these eligibility criteria, plus the qualified GST status, you can then successfully claim the instant asset tax write-off.
More Eligibility Rules
- If your small business has less than $10 million revenue yearly but is a subsidiary of a larger company, and the combined annual revenue is more than $10 million, then your subsidiary may not be eligible for the instant asset tax write-off.
- Small business vehicles that are also used for personal purposes can’t claim the full deduction. The ATO will only approve a tax deduction based on the percentage of the vehicle’s business use.
What if the vehicle is more than $30,000?
You really are limited to a vehicle that is under $30,000. However, there are some ways you can try and bring the cost down on a vehicle that may be higher than the threshold:
1. If your business is registered with the Australian Taxation Office (ATO) for GST, you can lower the taxable purchase amount of the vehicle by knocking off the 10 percent GST immediately.
2. Check if you can get national fleet discounts, which most car manufacturers offer for some low-priced Light Commercial Vehicles (LCV).
3. Consider purchasing a used vehicle. The tax offset still applies.
By June 30, you can talk with your accountant or tax agent to confirm your eligibility for the instant asset tax write-off. You need to provide your small business’ income and all deductions, along with the tax return.
Also bear in mind that you can’t claim both the depreciation and instant write-off at the same time.
Commercial Car Finance with Aussie Car Loans
Now that you know about the instant asset tax write-off and whether your business is eligible, it’s time to take advantage of the End of Financial Year (EOFY) sales and upgrade your company vehicle. But before heading to the dealerships, get pre-approved for commercial car finance first with Aussie Car Loans. We provide a range of options from novated car leasing, hire purchase and chattel mortgage.
Read our article on leasing versus hire purchase.
Call us today on 1300 889 669 or apply online today.