One month to go before Instant Asset Write-Off deadline
Generous business vehicle tax break to be drastically wound back from July 1It’s the first day of June and that means there’s just one month to go before the federal government’s current Instant Asset Write-Off (IAWO) tax break for ABN holders expires (on June 30), as announced in the 2023-24 federal budget last month.
After that it will be the end of the generous tax break that currently allows small businesses to purchase a new or used work vehicle priced at up to about $65,000 and claim the full deduction on their tax in the first year, rather than over several years.
The only caveats are that businesses must have an annual turnover of less than $5 billion and that vehicles must have a payload of less than 1000kg – and be delivered by June 30.
That could prove difficult amid the severe stock shortages currently affecting the entire auto industry due to production and shipping delays, leading to long customer delivery wait times, so forget about ordering and receiving a new Ford Ranger within the next month, for example.
From July 1, the current IAWO arrangement will be replaced by a new tax regime that applies only to businesses with an annual turnover of less than $10 million and puts a much lower $20,000 cap on assets, including work vehicles.
Business vehicles costing more than that can still be deducted, but the deduction must be spread over three financial years rather than one.
And to be clear, the total amount paid for a work vehicle is not refunded at tax time under the current IAWO scheme, but can be used as a tax deduction to reduce the taxable income of a business. And of course only the business-related proportion of vehicle expenses are tax deductable.
Right now, less than a handful of new models remain on sale in Australia with a sub-$20,000 starting price, including the Kia Picanto micro hatch, the MG3 light hatch and the Kia Rio light hatch, which is about to be discontinued and is pretty much unavailable.
So right now, the best option for tradies and businesses keen to take advantage of the existing tax break could be to buy a used, demo or near-new vehicle priced under $65K, almost 150,000 of which are currently listed at carsales.
Related: Ute and van buyers hit by instant asset write-off cuts
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