You’ve probably heard people getting excited about instant asset write-off. It's a tax-reduction scheme being offered by the federal government, allowing you to buy assets (including one or more vehicles) and have their costs instantly written off your tax for up to $150,000 for each asset that you buy. Now isn’t that generous! If everything we hear about it is true, then don’t wait till the offer expires before you buy your dream ride!
It does sound too good to be true, not to mention sinfully extravagant in the face of a crisis. This much I can tell you, though, the IAWO is real, and so is the $150k threshold. However, as you may have already suspected, it’s not as simple as that or true to all.
So what is Instant Asset Write Off, and what is it not?
Incentive to businesses
The enhanced IAWO is a part of the government’s incentive package designed to encourage businesses to acquire assets that will help pump-prime the economy on its road to recovery from the coronavirus crisis. Businesses with less than $500 million aggregated annual turnover are eligible. The $150,000 threshold is applicable for assets, new or secondhand, bought (installed and ready for use) from March 12 to June 30, 2020.
Deduction to taxable income
IAWO is a tax deduction that eligible taxpayers can claim in their tax returns, resulting in a lower tax for the 2019-20 income year. Though it is part of the government’s stimulus program, the screaming $150k headline that you often hear of is not a cash handout but a threshold for the cost of an asset that you can deduct from your taxable income.
Claimable deduction per asset
Another good thing about the threshold is that the deduction is claimable per asset. So, if you need to buy multiple assets, say a truck and office equipment, you can claim the deduction for both since the $150,000 limit applies to each asset you buy.
Intended for assets used in the business operation
Qualified assets are those intended for use in the actual conduct of a business, such as farm tractors, manufacturing equipment, logistics vehicle, and factory machinery. Motor vehicles intended for work and commercial purposes – such as vans, utes and trucks – are qualified for an instant asset write-off. Passenger cars, however, are not included. Yes, you heard it right – passenger cars don’t qualify. So at this point, if your dream car happens to be a luxury sedan, it doesn’t count for instant asset write-off. Head on to those pick-ups and vans!
‘But many businesses need a passenger car,’ you may insist. Yes, that’s true, and you may still deduct that (write off) under the depreciation limit of $57,581 and not under the IAWO.
Ends on June 30 2020
You may enjoy the benefits of the IAWO until June 30 this year. There have been calls for its extension and the inclusion of passenger cars, but there’s no word yet about the government’s response about it. Meantime, you still have over a month to decide on which motor vehicle or asset your business would need most.
For car buyers out there – well, okay, ‘vehicle’ buyers out there – the government is geared at supercharging the economy with these incentives. Let’s make the most of these offers and help kickstart the market!
The best vehicles that you could write off your tax claims
Like we said, buying a new vehicle at this time may sound a bit insensitive, but think of it as helping ignite the economy. If you have the means for it and your business needs it, then why not? Think of it this way - instead of you handing your money to the ATO as tax, the government now tells you to use your money to buy an asset that can help the country recover and claim tax deductions in the form of IAWO. That sounds reasonable. Now, let’s see if any of these commercial vehicles match the needs of your business.
- Ram 1500 (Laramie Crew Cab) – costs around $105,000, which you can claim entirely for instant writing off.
- Volkswagen Caddy Urban Edition – offered at $37,000 driveaway.
- Toyota HiLux Rugged CX – up for grabs at $65,000.
- Iveco Daily – a real workhorse with Australian-made aluminium tray; it is packed with a lot of bonuses and comes at a price tag of $58,000.
Coincidentally, the government's IAWO and the dealerships' end of financial year (EOFY) deals have combined to give you the best value and economic benefit if you buy a car during this most unusual time of the century.
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