Australian small businesses will be able to deduct the full value of any new work vehicle purchased since last October after the Federal Government announced it is extending its instant asset write-off scheme for another year.
In last night’s 2021 Federal Budget, the Government said there would be a 12-month extension to the ‘temporary full expensing measures’ until June 30, 2023 which industry figures claim will hopefully lead to a boost in new car sales following a record month in April.
The scheme, initially announced as part of the 2020 pandemic-hit budget last year, provides eligible businesses with a turnover of up to $5billion to claim big ticket items such as new vehicles as an expense in one financial year rather than the usual five.
Under the current law, such businesses are entitled to write-off the value of an asset, such as a new work vehicle, purchased after 7.30pm AEDT on October 6, 2020, and first used or installed ready for use by June 30, 2022.
It means eligible buyers who are worried about taking delivery of a new work vehicle due to stock shortages before the original deadline now have an extra 12 months to get them on the road.
The extension also means any losses incurred up to June 2023 can be offset against prior profits made going back to the 2018-19 financial year.
The news has been welcomed by the peak body representing franchised new car dealers, the Australian Automotive Dealer Association (AADA), as a much-needed boost to the auto industry’s recovery as the rule change makes it a good time to buy a new work vehicle.
Prior to the pandemic, the car industry had experienced 31 months in a row of sales decline.
“This budget has confirmed a stunning economic recovery for Australia and many of the measures announced will put the automotive industry in a good position to invest in Australia and employ Australians,” said AADA CEO James Voortman.
“Prior to the pandemic the automotive industry had experienced a sustained period of falling sales and recession-like conditions, but we have since been able to get back on our feet.
“The extension of the full expensing measure until June 30, 2023 will come as welcome news for many in our industry. This will give businesses including Australia’s more than 3,000 dealerships the confidence to invest.
“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 instant asset write-off applies to vehicles costing up to $57,581 (2019-2020) and up to $59,136 (2020-2021). Both thresholds are well below the current primary Luxury Car Tax threshold of $68,740.
However, the full purchase price of eligible trades vehicles (new or used for 100 per cent business use and able to carry more than 1 tonne) can be claimed as a work expense in one financial year rather than five under the scheme – if the vehicle costs more than the aforementioned limits, but less than $150,000.
“Australia is coming back,” said Treasurer Josh Frydenberg. “This budget will ensure we come back even stronger, securing Australia’s recovery.”
“[We’re] announcing the extension of these measures for a further year until June 30, 2023, so a tradie can buy a new ute, a farmer a new harvester and a manufacturer expand their production line.”
The tax break is expected to reduce tax revenue by $17.9 billion over the forward estimates and $3.4 billion over the medium term as the measure brings forward deductions that would have been made in future years, according to News.com.au.
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