Accelerated Depreciation for Small Businesses Explained

Posted by Motorama in Buyer Advice

Buying a car for your business? The government might be able to help you out at tax time.

In addition in a reduction of the company tax rate, the threshold for immediately deductible items has been raised from $25,000 to $30,000; meaning that any equipment purchased from 29 January 2019 for your business (including cars) will be written off on your tax until June 30, 2019.

Effective until June 30, 2019, assets up to $30,000 ex GST (excluding stock, horticultural plants and software developed in-house) are eligible for a 100% tax write-off for any business with a turnover less than $50 million, up from $10 million.

What is it?

It’s obviously more complicated than the government just handing out $30,000 tax returns for free.

This form of accelerated depreciation allows you to reduce your taxable income by $30,000 – resulting in a cash flow benefit relative to the rate you’re taxed at.

Global accounting firm BDO uses the example of a small business, registered for GST, purchasing a vehicle with a GST-inclusive value of $32,999 ($29,999 ex GST). The vehicle is purchased between 2 April 2019 and 30 June 2020 and used 100% in business. If the vehicle is used 100% for your business, you will be entitled to an immediate deduction of $29,999 as well as being able to claim the $2,999 as a GST input credit.

In real terms, this means that small businesses will have a less complicated tax return to complete, as their assets will either qualify for the immediate write-off or, if the asset is valued over $30,000, with depreciation based on useful life. For example, the ATO assesses the useful life of a business vehicle at a maximum of 8 years.

In order to make the most of the deductions, businesses would have to claim before June 30 of this year in order to maximise cash flow benefits with any assets claimed.

What can I claim?

The allowance permits for any asset you need to run your business including cars, vans and operating equipment (such

as new furniture for a café or extra water tanks for a nursery). In terms of business vehicles, you can claim the tax deduction on any new or used cars that are invoiced at up to $20,000 ex GST. This could be a used van to make your café mobile during lunchtimes, or upgrading to a new cab chassis ute to fit an existing tray setup.

Assets over $30,000 can be fully written off, but not immediately. You can group your assets that exceed the threshold in order to depreciate them at the same rate (15% in the first year, 30% for every year after that).
It is also worth noting that if an existing asset is in a depreciation pool and will be valued at less than $30,000 by June 30, 2019; it can be written off under this new method of accelerated depreciation.

Buying a car

If you do need a business vehicle, Motorama has dedicated, expert teams across our dealerships; who can help you with solutions to get you on the road with expertise in service, sales, finance and insurance. We also have a fantastic range of new, used and demonstrator cars under $30,000 across our group of dealerships. They will also be able to give you more specific information, as these numbers are a broad guidance only and written in general terms. They can therefore not be replied upon to cover specific situations.

Motorama have one of the largest selections of quality pre-owned cars for sale in Brisbane. If you are in the market for a second hand car, we will have the right car for you. We stock cars across all price ranges starting for under $10,000, at our convenient dealer locations in Moorooka, Springwood and Browns Plains.

We specialise in all things auto, and only stock the best quality cars from brands including Toyota, Mitsubishi, Holden, Ford, Nissan, Hyundai, Kia, Honda, Subaru, Volkswagen, Mazda, BMW and many more.

Search pre-owned stock

Why Finance at Motorama

Financing your car at Motorama is quick and simple, that's why 1 in 2 retail customers financed through Motorama in the past year.

Our fully trained and accredited Business Managers are specialists in automotive finance and insurance. They are more than happy to answer any questions you may have during the car buying or financing process.

Learn More