Federal tax breaks to continue ute boom

The federal government’s big-spending budget has delivered good news for business owners with the extension of the instant asset write-off scheme that has been instrumental in stimulating strong growth in vehicle sales, particularly utes.

Now known as the ‘temporary full expensing’ measure, the write-off was introduced early in 2020 as the COVID-19 pandemic took hold in Australia (and was revised later in the year) to allow businesses with a turnover of up to $5 billion to write off the full value of an eligible asset such as a work vehicle.

The extension will apply to eligible assets, whether new or second-hand, that are acquired between October 6, 2020, and June 30, 2023 – a year longer than before.

The government will also reduce the tax rate for small and medium businesses, from 30 per cent to 25 per cent from July 1, 2021, and has kept the so-called ‘low and middle income tax offset’ for individuals in place for another year.

The Australian Automotive Dealer Association (AADA) said the measures should stimulate ongoing vehicle sales, which have this year seen utes such as the Ford Ranger and Toyota HiLux flying out of showrooms at record pace as consumer and business confidence is restored.

“The extension of the full expensing measure … will come as welcome news for many in our industry. This will give businesses including Australia’s more than 3000 dealerships the confidence to invest,” said AAA chief executive James Voortman.

“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 government is also continuing to invest heavily in Australian roads across all states and territories.

The Australian Automobile Association (AAA) has welcomed the latest measures, which bring road infrastructure spending to $7.77 billion this current financial year – up from the $7.38b commitment made last October – and add a further $8.2b in the year ahead.  

“Now that this standard of delivery has been set, motorists will expect the government to deliver in full on its road funding commitments in the year ahead,” said AAA managing director Michael Bradley.

However, the AAA chief said he was concerned by the lack of clarity regarding to road safety funding and urged that “no government should view road safety through the prism of economic stimulus”.

“No Australian wants their government to say its interest in road safety is only pegged to economic returns,” Bradley said. “Saving each of those lives is equally important and should have the laser focus of government.”

There was no specific funding for electric vehicles in last night’s budget, despite the headline pre-budget announcement of $1.2bn being invested into “low emissions technology innovation and commercialisation”.

Most of this relates to programs outside the automotive industry, but there is $275.5 million allocated to helping develop four new hydrogen export hubs, which the government says increases its commitment to building an Australian hydrogen industry to more than $850m.

This might help development of the fledgling hydrogen fuel-cell electric vehicle industry in Australia, which has moved forward this year with the launch of the Hyundai NEXO and Toyota Mirai FCEVs.

But the Climate Council says the government has failed to take advantage of the opportunity “to fund a clean recovery from COVID-19”.

It cites data from the Global Recovery Observatory that “shows that Australia has spent $US130 billion on COVID recovery efforts but less than two per cent of that money has been spent on solutions to reduce emissions”.

In contrast, Germany and France allocated 47 per cent and 50 per cent of their respective recovery spending to clean solutions, according to the council.

“Among major economies and our strategic allies, Australia is right at the bottom of the pack when it comes to spending on solutions that reduce emissions, create jobs and strengthen our economy,” said Climate Council spokesperson and economist Nicki Hutley.