Transport managers guide to optimising instant asset write-off

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With the new tax year comes opportunities to maximise business reliefs. Particularly useful for Vehicle and Equipment purchases, we keep you up todate with Instant Asset Write off, available up to December 31, 2020.

Business Tax

As a business owner, you always strive to keep your operating expenses to a minimum - but come tax time, that's not necessarily easy.

For that reason, you should certainly look into how you or your transport manager can take advantage of instant asset write-off - as this may be able to save you tens of thousands of dollars (or more!) on your obligations.

What you need to know

The Australian Taxation Office recently extended the instant asset write-off allowance of up to $150,000 through the end of 2020. This means you will be able to claim the deduction for any piece of equipment or machinery you install between 1 July and 31 December.

Previously, this write-off was only allowed for assets first used - or installed and ready for use - between 12 March and 30 June.

The good news is that this deduction can be used in multiple ways. For instance, whether you bought a number of new or previously owned assets or a single one, you can claim the write-off as long as the cost (individually or combined) was below that $150,000 threshold.

However, the ATO notes that the write-off cannot be used for certain items, including those that cannot be claimed under simplified depreciation rules.

Determining whether you're eligible

Another bit of good news for businesses is that, along with a longer time period for claiming, eligibility requirements regarding what kinds of companies can make use of the write-off has also been expanded.

Your business is likely to be eligible for the deduction as long as you have an aggregated turnover of less than $500 million, and as long as it meets some of the other requirements listed above (including the date the item or items were purchased, installed or used).

Now is certainly the time to review your options for qualifying and make your forthcoming purchasing decisions with all these standards in mind. Having the ability to take advantage of these expanded allowances from the ATO could go a long way toward improving your company's bottom line. 

What can you claim?

It's worth noting that depending on the type of vehicle you buy, you will likely have to claim deductions in different ways. For instance, passenger vehicles are classified as those that are designed to carry fewer than nine passengers and less than one tonne.

For vehicles larger than that - such as utes or vans intended for heavier workloads and hauling capabilities - you will likely have to follow different deduction rules.

In addition, you need to understand what aspects of a vehicle purchase you can claim. For instance, no matter what features you include in a new vehicle, you may be able to write off those costs as long as the total expense is below the threshold for instant asset write-off.

There are many other things you may be able to write off in addition to the cost of the vehicle itself. These can include anything you spend on fuel and oil, necessary repairs or maintenance, interest on finance, insurance premiums, registration fees and depreciations. If you choose to buy instead of leasing your vehicle, you can also write off the entirety of that monthly cost, again, assuming it comes in under the threshold.

It's worth noting that if you sell a company vehicle for any reason, the amount you can claim in total is reduced by the dollar value you received for that sale. This is also true of when your vehicle is damaged or stolen and you receive an insurance payout to cover the value of that vehicle.

Business vs. personal use

However, companies - especially those that control a fleet of vehicles and allow employees to utilise them for personal driving as well as business purposes - need to make sure their workers keep accurate driving logs or at least estimates for their driving habits.

If, for example, an employee drives a vehicle for work about 80 per cent of the time, but the other 20 per cent of kilometres they put on it were part of personal use, you can only write off 80 per cent of the expenses associated with its maintenance.

The same is true for purchases or leases. If a vehicle will be used 80/20 for business and personal use, you will only be able to write off 80 per cent of that cost, and take on the rest of the expense yourself.

 

At Classic Funding Group, we're here to help with Vehicle and Business Equipment Finance.

Enquire now

 

DISCLAIMER:  This article is for general informational purposes only. It is not financial advice. You should consult your accountant or tax professional on the tax treatment of any asset used in your business.

Sources:

https://www.ato.gov.au/Newsroom/smallbusiness/General/Good-news-for-instant-asset-write-off/

https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/Simpler-depreciation-for-small-business/Instant-asset-write-off/

https://www.ato.gov.au/Newsroom/smallbusiness/General/Claiming-instant-asset-write-off-in-tax-time-2020/

https://www.ato.gov.au/General/Tradies---be-certain-about-what-you-can-claim/

https://community.ato.gov.au/t5/Business-tax-questions/Instant-tax-write-off-to-buy-new-car/td-p/29347

https://www.ato.gov.au/Business/Income-and-deductions-for-business/Deductions/Deductions-for-motor-vehicle-expenses/