Since 2015, small business owners, under the Federal Governments Accelerated Depreciation Program have been able to access instant asset write-off of purchases up to $20,000. In the recent budget, the definition of a small business as it relates to this matter has changed. Small businesses with a turnover of up to $10 million (formerly $2 million) can now access the program.
Treasurer Scott Morrison said recently “Small business owners are out there fighting for growth in their businesses every day. They deserve our respect and support”.
“Backing up our recently legislated tax cuts, small businesses with turnover up to $10 million will continue to immediately write-off expenditure up to $20,000 for a further year.”
As it relates to cars, there’s a little-known issue that small business owners need to be aware of. The Instant Asset write off pegged at $20,000 is net of the Goods and Services Tax (GST). What that means to a small business owner is that they can exclude on road costs (registration, third party insurance, and stamp duty) AND the GST on the vehicle transaction.
In reality is that a vehicle priced at $22,000 (including GST) is eligible for the write-off. And there are so many vehicles that fall into this category, most manufacturers have a few. Here’s an example from Toyota.
2017 Toyota Corolla Ascent fitted with 1.8 Litre Engine and CVT Auto Transmission
Sale Price $21,587.90
Third Party Insurance $352.60
Stamp Duty $669.00
TOTAL $22,990 Drive Away
So, looking at these prices, you’ll see that the actual sale price is $21587.90. When you exclude the GST of $1962.54 from this price, the net figure is $19625.36, under the $20,000 write-off limit. My advice would be to pay the on-road costs separately, which is also claimable in this financial year.
There are a lot of vehicles that fall into this category, so best to get prices on a few, with the breakdown shown clearly. Remember that you can deduct any discount you’re getting from the list price – if the GST on a quote comes in at less than $2000, then you’re buying a vehicle that qualifies.
Don’t take my word for it – the bottom line is that you need to be aware of your rights. Talk to your accountant or bookkeeper and get the tick from them. If you’re still unsure, check out the ATO website for more information.