Tradies and small businesses waiting for cars delayed by severe stock shortages have been given more time to take delivery of their new vehicles after the Federal Government announced another extension of the instant asset tax write-off scheme.
The scheme enables eligible tradies and businesses – with a turnover of less than $5 billion – to claim as an expense big ticket items, such as work vehicles, in one financial year rather than over the usual five years.
The tax incentive was expanded in 2020 to stimulate the economy during the peak of the coronavirus crisis.
In last night’s federal budget, the government extended the deadline again.
The instant asset write-off scheme’s most recent deadline of 30 June 2022 has now been pushed back to 30 June 2023.
The tax incentive is now formally known as the “temporary full expensing scheme”, though many in the car industry still refer to it as an instant asset write-off.
It means eligible buyers concerned about taking delivery of a new work vehicle before the original deadline, now have an additional 12 months to get them on the road.
“Given the uncertainly over continued stock shortages, this extension will give businesses the confidence to invest in vehicles without the fear of them not being delivered in time,” said James Voortman, the chief executive of the Australian Automotive Dealer Association (AADA).
Steven Bragg, from accounting advisory and consulting firm Pitcher Partners, told CarAdvice: “If you’re an ABN holder and your business is making a profit, this is good news. A lot of businesses will take advantage of the extension. It means now is a good time to invest in new work equipment, including motor vehicles.”
However, Mr Bragg warned: “People wanting to benefit from the temporary full expensing extension need to get independent tax advice to find out how a vehicle purchase affects their individual circumstances.”
The instant asset write-off is applicable to motor vehicles valued up to $57,581 in the 2019-2020 financial year and up to $59,136 in the 2020-2021 financial year. Both thresholds are well below the current primary Luxury Car Tax threshold of $68,740.
However, the full purchase price of eligible “tool of trade vehicles” (new or used, for 100 per cent business use and which can carry more than 1 tonne) can be claimed as a work expense in one financial year rather than five financial years under the scheme – if the vehicle costs in excess the nominal $57,581 or $59,136 limits, but less than the $150,000 limit.
In a media statement, the CEO of the AADA, James Voortman, said: “The significant tax relief provided to many middle- and lower-income Australians is welcome news and will no doubt instil consumers with the confidence to spend.”
The AADA said last night’s budget “builds on the many measures put in place over the past 12 months which have encouraged business to take the lead in Australia’s economic recovery.”.
Prior to the pandemic, the car industry had experienced 31 months in a row of sales decline – the longest slowdown since the Global Financial Crisis of a decade ago.
“The extension of the full expensing measure until 30 June 2023 will come as welcome news,” said Mr Voortman. “This will give businesses – including Australia’s 3000 new-car dealerships – the confidence to invest,” he said.
Footnote: CarAdvice has checked the information in this story with tax experts, however this article does not represent financial advice. CarAdvice recommends buyers consult a tax expert before buying a new vehicle, to see how the scheme may impact their individual circumstances.