2023-24 Federal Budget: Ute buyer frenzy to beat June 30 deadline for Instant Asset Write-Off
Ute buyers and tradies are in a race against time to take delivery of their new work vehicle before the current Instant Asset Write-Off tax break expires and the spending cap drops from $65,000 to $20,000 – barely enough for a pizza-delivery hatchback.
Ute buyers and tradies have until 30 June 2023 before the current Instant Asset Write-Off tax break reaches the end of the road – and is replaced by a new scheme that puts a $20,000 cap on work cars.
Motor vehicles that cost more than $20,000 can still be purchased for work, however the tax deduction must spread over three financial years rather than one.
The changes – announced in the 2023-24 Federal Budget – put tradies and small businesses in a race against time to take delivery of new work cars before 30 June 2023 amid chronic stock shortages, production slowdowns and shipping bottlenecks.
Under the current Instant Asset Write-Off scheme, companies with a turnover of up to $5 billion could claim the purchase of business assets up to $150,000 as a work expense in the same financial year, rather than spread the tax deduction over three financial years.
The current scheme included a cap on new or used motor vehicles up to $65,000 (in round numbers) for the 2022-23 financial year.
Although the Instant Asset Write-Off scheme was introduced in 2011 to kick-start the economy in the wake of the Global Financial Crisis, the “car limit” in recent financial years ranged from $57,581 (2019-20), $59,136 (2020-21), $60,733 (2021-22) and $64,671 (2022-23).
However, the current Instant Asset Write-Off tax break is due to expire on 30 June 2023.
Announced in the 2023-24 Federal Budget, the revised Instant Asset Write-Off scheme will put a cap on $20,000 for new and used work cars – and only applies to businesses with a turnover of up to $10 million.
This means fewer businesses will be eligible to use the entire purchase of a motor vehicle as a tax deduction in one financial year.
And the list of eligible vehicles for the Instant Asset Write-Off will shrink dramatically from 1 July 2023.
There is only a handful of new cars priced below $20,000, including the Kia Picanto (pictured above) and MG 3 hatchback, though used cars are also eligible if purchased as a work vehicle.
From 1 July 2023 business vehicles that cost in excess of $20,000 will need to be claimed over three financial years rather than one.
To avoid confusion, the Instant Asset Write-Off tax break does not mean the total amount paid for a work vehicle is refunded at tax time.
It means the amount paid for a work vehicle can be used as a tax deduction – to reduce the taxable income applied to a business.
And even then, only the work portion of vehicle expenses can be applied to a tax deduction.
This news story is not tax advice and is a guide only.
For more detailed information on how the changes to the Instant Asset Write-Off could affect your business and/or your individual circumstances, please consult a qualified tax expert or accountant.
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