Savings.... business owners are entitled to an allowance of 30 per cent on luxury cars which will be available til June 30 2009.
Luxury car sales have been given a substantial leg-up thanks to the Australian Taxation Office.
For a short time, it classes luxury cars bought for a business as a capital expense and therefore entitled to the 30 per cent investment allowance.
This produces significant savings for the business owner and can — depending on circumstances — have benefits for a business' employees with a salary package including a car.
KPMG spokesman Craig Yaxley says the ATO included vehicles within its investment allowance parameters in December 2008.
"It was intended as a short-term economic stimulus," he says.
"The 30 per cent allowance covers vehicles bought, or a contract signed, prior to June 30, 2009.
"Eligibility includes the need to have an operating business and there is a limit of $100,000."
However, Yaxley says the deduction only affected the portion of the vehicle price that was beneath the luxury car threshold of $57,180.
For example, if a car was worth $100,000, only the $57,180 would be used for the allowance. The 30 per cent of the $57,180 is $17,154 and that is the deduction allowable under this program.
If company tax is 30 per cent, then the effective rebate is $5146 — that is, 30 per cent of $17,154.
Yaxley says the allowance did not affect the normal tax deduction of the car over its life.
The same exercise can be done for cars valued at less than $57,180.
However, here's where it can get tricky.
"If the car is leased or there is a novated lease as part of the worker's remuneration, the allowance still applies," Yaxley says.
"However, one of the interesting developments is `who gets the allowance?'.
"The allowance is based on the owner of the business receiving the benefits. If it is a lease, the benefit goes to the company owner. If there is a novated lease, the beneficiary is also the employer — but this is not the car owner.
"It will be up to the employer or business owner to pass on any benefit to the leasee."
But Yaxley says there was no legal reason that this should occur.
The allowance of 30 per cent is available until June 30 this year, however the ATO advises that a 10 per cent allowance will be available from July 1, 2009 until December 31, 2009.
