Legislation has now passed giving effect to some of the key tax changes announced in the 2020-21 Federal Budget, including the immediate expensing rules for depreciating assets.
These changes allow businesses with a turnover of less than $5 billion to deduct the full cost of eligible depreciating assets that are first held and ready for use between 6 October 2020 and 30 June 2022.
Businesses with a turnover less than $50m can also apply these rules to second hand assets. However, before you rush out to buy a new car, be aware of the ceiling value applied to higher-value vehicles.
For example, if the luxury car limit is set at $59,136 for the 2020/21 financial year and if you buy a Toyota Sahara for $137,000, you’ll only be able to claim the cost limit less GST against your taxable income. How this works:
Cost of vehicle: $137,000
Cost limit of vehicle $59,136
Business use 80%
The maximum depreciation/write-off allowable for the purchase of the Sahara would be $43,008. This is the cost limit of the vehicle ($59,136) multiplied by the business use percentage (80%) less GST on the business use percentage. Therefore, the maximum GST claimable would be $4,300.
The cost limit for vehicles is for cars and station wagons, including four-wheel drives. For a vehicle to be exempt from these rules, it must be classified as a commercial vehicle, i.e. designed to carry a load rather than passengers.