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What the small business tax break means for new and used car buyers

The 2015 Federal Budget raised a few eyebrows, with the new benefits for small businesses generating the most attention.

The biggest talking point surrounds changes the government has made to existing accelerated depreciation rules. Under the new scheme, eligible businesses with an annual turnover of under $2 million are able to claim an immediate tax deduction on items purchased that are valued up to $20,000 inc GST.

Previously, the maximum for this scheme was set at $1,000, so it’s a big jump. Any purchases over that threshold had to be claimed as deductions over a number of years.

Tools for tradesmen or coffee machines for cafes have been suggested as examples of using the accelerated depreciation changes, but you can also use the small business incentive to buy a new or used car.

When does it come into effect?

The incentive is available now, having started on Budget Night 2015 (Tuesday, 12th May) and will run up until 30 June 2017, should everything go to plan.

Some experts have suggested that consumers should wait until the scheme passes through Parliament before taking advantage, but it appears unlikely to be overturned. It should also be noted that the ATO will be keeping a close eye on ABN applications, for those wishing to exploit the new scheme.

So, how does the small business tax break help to get you a new car?

First up, you need to be running an eligible small business with an annual turnover of less than $2 million.  

If so, you can start looking at cars under $20,000 inc GST. Only purchases under the $20,000 inc GST limit will be eligible for accelerated depreciation.

Depending on your particular circumstances, you may then be able to claim a deduction up to the full purchase price of the vehicle in the year of purchase.

What type of car can you buy?

Businesses have the option of purchasing a new or used vehicle that will be used for commercial purposes.

Don’t be surprised if new car manufacturers start offering sub-$20,000 deals in order to tempt buyers into a purchase.

What about cars over $20,000?

If you’re looking at a car over $20,000 it can still be deducted, but would not qualify for accelerated depreciation.

These purchases would be subject to existing deprecation rules as per the relevant tax law.

Financing your purchase to utilise the small business tax break

So, you’re a small business owner and you’ve got a car under $20,000 in mind. The only thing missing is the finance required to complete the purchase.

The good news is that the small business tax break remains whether you're purchasing the vehicle through finance or not. That means you can go to a finance company, work out the appropriate package for you, and be enjoying your new car sooner.

It is important to consult with your tax agent/tax advisor to ensure the loan facility you are considering entitles you to take advantage of the accelerated depreciation scheme.

An important aspect to note, as always, is to organise your finance before selecting your car, which will give you a better idea of your budget.

Key takeaways

•Be an eligible small business with under $2 million in annual turnover
•Choose a vehicle under $20,000 inc GST to ensure you maximise your tax deduction
•Organise finance before shopping to clarify your budget

This page is intended to provide you with general information relating to changes made in the 2015 Annual Federal Budget with reference to accelerated depreciation.

You should always consult your tax advisor prior to making any decisions on purchasing a vehicle for your business and using such schemes. We accept no liability for any reliance placed on the information provided on this page.


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