If you haven’t already looked into the benefits of the instant asset write-off for your business, now is the time. The instant asset write-off program is one of the best tax breaks available for Australian businesses. With EOFY just around the corner, it’s time to get everything lined up so you can claim your write-off for the 2020/21 financial year.
To help you along, we’ve compiled a complete guide to answer all your car related instant asset write-off questions.
Don’t forget to consult your accountant or financial advisor for specific advice on how the instant asset write-off program applies to your situation – they will be able to give you specific advice and are your best friend here.
What is the instant asset write-off?
Instant asset write-off lets you purchase capital assets for your business and receive an immediate tax deduction of the same amount. In short, whatever dollar amount you spend on business-related assets during the eligible period can be fully deducted from your taxable income.
This used to be limited to businesses with an aggregated annual turnover of $50 million or less. But with the new temporary full expensing measure, the annual turnover threshold has now been increased to $5 billion for eligible new asset purchases made between 6 October 2020 and 30 June 2022. For eligible second-hand assets, the turnover threshold is still $50 million per year.
On top of this, as part of the government’s Coronavirus Stimulus Package, the asset threshold has increased from $30,000 to $150,000 per asset. These changes open up more options for even more Australian businesses.
Pretty exciting, right? It’s never been a better time to upgrade your assets and give your business that extra boost!
What’s eligible for instant asset write-off?
If you have a small business, you can claim an immediate deduction for most assets, whether the asset you bought is new or second-hand (remembering the $50 million yearly turnover threshold for second-hand assets).
Some common eligible assets include:
Cars, vans and utes
Computers, laptops and tablets
Cash registers and point of sale devices
Plant and machinery
Fittings and fixtures
Shelving and storage
What types of vehicles are eligible for instant asset write-off?
You can claim cars, utes, vans, trucks, motorcycles… you name it, as long as it is used for business purposes. However, there is a cap in place for vehicles that are classified by the ATO as ‘passenger cars’, as opposed to ‘commercial vehicles’.
What’s the instant asset write-off cap for cars?
A car limit applies to ‘passenger vehicles’ (except motorcycle or similar) designed to carry a load of less than 1000kg and fewer than nine passengers. The limit is:
$57,581 for the 2019–20 income year
$59,136 for the 2020–21 income year (this financial year)
This limit doesn’t apply to ‘commercial vehicles’ designed to carry a payload of more than 1000kg.
So, for example, if you bought a 2021 Ford Ranger Wildtrak X with a payload of 929kg for $65,000, you would only be able to claim $59,136 as a deduction. This is because its payload is less than 1000kg, it is therefore deemed a ‘passenger car’ and subject to the car limit.
However, if you bought say, a 2021 Toyota Landcruiser GXL with a payload of 1100kg for $71,000, you would be able to claim the full $71,000 as a deduction since it is over the 1000kg payload threshold for ‘commercial vehicles’.
Can I still get instant asset write-off if my car isn’t purely for work?
Your vehicle doesn’t have to be purely for work to be deductable. With instant asset write-off, you can deduct the business portion of your vehicle.
For example, if you purchased a car for $38,000 and you use it for 75% business use and 25% personal use, you can claim the business portion of 75% of the purchase price – which is $28,500. If you use your car 100% for work, then of course you can claim the full purchase amount of $38,000 as an immediate tax deduction.
Can I get instant asset write-off for more than one vehicle?
Yes, there is no limit to the number of assets you can claim, a long as each asset is $150,000 or less – remembering the $59,136 ‘passenger car’ limit.
Are car accessories eligible for instant asset write-off?
Accessories installed by the dealer at the time of purchase are included in the vehicle's asset offset value.
What if I purchase my vehicle with a car loan?
How you finance your vehicle doesn’t impact your eligibility for the instant asset write-off. In fact, car finance brokers with extensive industry connections have accelerated lending processing capacity and can fast-track your car funding. This will help you be ‘first-in’ to nab the car you want in today’s competitive market.
CarClarity’s smart loan matching technology will get you pre-qualified for your top loan options from 30+ lenders in less than 60 seconds. It won’t impact to your credit score and will give you a better understanding of your options for quick action.
Am I better off buying through a car broker?
Using a reputable car broker can greatly increase your chances of sourcing your car quickly and at better prices. This is particularly valuable in the current market where we are seeing record low car supplies and unprecedented demand. A car broker’s wider reach and speedy delivery could be particularly useful if you want to claim your vehicle in the current 2020/21 financial year before 30 June 2021.
Talk to a car buying expert to understand your best options for sourcing a new or second-hand commercial vehicle.
Talk to your accountant or tax advisor
While we have made every effort to provide you with useful and accurate information, this doesn't take your individual situation into account and should not be taken as financial advice. Refer to the ATO website for the most up-to-date information and consult your accountant for specific advice.
David Fahim is CarClarity's COO, joining forces with two founding team members that share the same passion of helping customers get the right car loan.
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