Two weeks remain on small business tax break
December 17, 2009 by Matt Brogan
There are now just two weeks remaining before the government’s small business tax break ends.
The deadline is looming and small business owners have until midnight, December 31 to take advantage of the investment allowance.
Businesses with an annual turnover of less than $2 million can claim the Small Business tax break. They can claim a 50 per cent bonus tax deduction, for eligible assets, costing more than $1,000 providing a commitment is made within the next fourteen days.
Delivery and/or installation of the asset can be any time before 31 December 2010.
Businesses with a turnover of more than $2 million per annum can access a 10 per cent bonus tax break for eligible assets contracted by 31 December 2009.
“We know of many businesses which have taken advantage of the Government’s stimulus package. VACC members have used this opportunity to purchase new computers, new hoists, new dynamometers and other necessary equipment to benefit, improve and expand their companies,” VACC Executive Director, David Purchase, said.
“But we are concerned some members of the retail automotive industry will miss out. That is why we are encouraging employers and managers of companies that fit the criteria to contact their accountant immediately.
“The Small Business tax break has been particularly helpful in providing an opportunity to upgrade and improve the company vehicle or fleet.”
The November VFACTS data, provided by FCAI, put the increase of 19.9 per cent (14,216 vehicles) compared to the same month last year, down to the Government’s tax incentive.
“There was a 35.4 per cent increase in business vehicle sales last month, proving that many small businesses have been able to buy more appropriate and safer vehicles thanks to the Small Business tax break.
“Any small business owner wanting to do the same had better act fast. This investment allowance ends in just two weeks and will not be extended,” Mr Purchase said.
(With Autonews)
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I think it stops at the LCT limit of $57K or whatever. I’m no accountant (there is a god!) but that means on $60K car, a bit under $30K is deductable, at company rates = around $9K in the hand. I’d be assuming you cant claim this AND depreciation at the same time, but I havent looked at that. Then again, $9K in the claw plus a refund on the GST, makes it pretty attractive if you were looking to upgrade within the next year or so. All of these seasonally adjusted figures are just an excuse to buy something shiny and new, for me.
I Just signed up for mine, apparently you don’t even need the car delivered this year. You just need to sign the contract before 31-Dec-2009. I’m guessing car sales are going to have a serious January hangover
Okay from what our accountants have told us, you need to have all paperwork signed (including finance) prior to the 31st of Dec.
That includes the HP contract if you are going that way, however a Chatel Mortgage just needs to be approved (apparently)
If you are paying Cash you need to pay for it by the 31st.
As to the Depreciation, yes you can claim it.
I had it explained as follows
Car price eg $44,000.00
claim gst $ 4,000.00
claim tax break $20,000.00
Depreciation $ 2,000.00 (ongoing for say 5 years)
So theoretically a 44k car will owe you 10k at the end of your five year chatel mortgage…
That is the theory and remember that when it comes to tax laws, accountants are like lawyers… it is always “to my understanding, the rules read like this…..” they’ll never give you a balck and white answer :p
the way i’ve been told…
ute $44000
gst $4000
instant potential deduction from taxable income $20000(say $6600 in tax)
then 1st to 5 year depreciation is still 22.5%
effective 150% depreciation thru 5 years
that why everybody has done it..
correct me if i’m wrong…
Jekyll, my understanding is that the depreciation works off reducing values, so if it started at 40K, yr 1 is (say) $8K (100% business use), year 2 is 22% of $32K, so only $6,500, year 3 22% of $25K (about 5K) and so on, so by year 5 your depreciated value is about $17K (assuming 100% business use). Then if you sell for $25K (heh heh heh – I’ll never do that!) then $8K goes into your taxable income (and you have to pay GST on the sale price too). that’s why some people turn the cars over at year 2 or 3 – max depreciation, but really, I think it’s just an excuse…
interesting to see whether the depreciation is on the sale price or the price after deduction, and whether that deduction affects the written down value. Remember also, the tax claim is only a deduction – it isnt a rebate, or money in your pocket. A $20K deduction at company rates translates to a “saving” of around $6,600 in tax. Still, better than nothing, and gives you the excuse for something new.
Depreciation starts from the original price and isnt affected by the “Tax break”
For the purposes of the 50% investment allowance, I understand that the LCT limits this deduction to $57K. My question is whether fuel-efficient cars’ claim limit is up to the $75K ‘LCT’ allowable for them?
No, the LCT Limit for the 50% deduction is $57K, even on fuel efficient cars who are eligible for the $75K limit.
Car price on road….$44000
GST claim back…….$ 4000 Approx. (it is actually a bit under that because of stamp duty
First year deduction = 22.5% of 40K + 20K = 29K deduction in first year
Second year deduction = 22.5% of 31K = $6975
Third year deduction = 22.5% of $24,025 = $5405.63
Forth year deduction = 22.5% of $18619.37 = $4189.36
Fifth year deduction = 22.5% of $14430.01 = $3246.75
After 5 years the vehicle owes you $ 11,183.26
In a nut shell the Tax break is the equivalent of getting 15% off the sticker price once you adjust for what you actually get back
THANKS ANDREW,
i reckon your spot on(for 2 more weeks…)
Yeah mate, I know thats how it works, Im kicking myself I bought my new car 2 months before the incentive started.
I did some sums and it actually turned out I would make money If I sold it and bought it new again.
The reason I backed out of it was they dont do my colour anymore :-(
Oh well, Ive got a new trailer on the way that will scrape in under this deal,
about $4.5K worth.
Good work Andy, My accountant did explain it to me. But I had a bad case of screen saver eyeballs during her speech. I’ve just spent 41K on a Hyundai which means in 5 years it will be worth $5.95 + GST if it still works.
Cool, so in 5 years you could trade it in on 2 cheese burgers…..
i just decided on a car 28Dec, Chattel Mortgage Loan approved today 30th but car wont be delivered until end of Jan or even later. This means I made it for the tax break, right? How do we prove loan is approved though, finance person at dealership emailed me saying, this email is to confirm that your finance is approved. Will that be sufficient evidence? What else should I ask for?