If you own/run a small business (turnover of the business plus the turnover of any other businesses run by the same entity must be less than $2 million per annum), one of the most effective tax breaks of recent years has been the ability to write of $20,000 immediately. Under this scheme, people in small business are allowed to claim an immediate tax deduction of all assets acquired for use in the business, up to the value of $20,000.
The $20,000 deduction can be made up of anything that is used in the running of the business eg. computer/office equipment, furniture, coffee machines, vacuum cleaners etc. – all qualifying items up to an aggregate of $20,000 until 30 June, 2017.
Motor vehicles are also included in the scope of the scheme provided the purchase cost is $20,000 or less. Second hand vehicles are also included for an immediate deduction. However, if a trade in is to be included in the purchase transaction, then the amount received on the traded vehicle is also to be included in the transaction ie your new vehicle is $25,000 and you trade your old vehicle for $6,000 making the purchase of your new vehicle $19,000 – unfortunately this is not a permitted deduction as the tax man considers the purchase price still to be $25,000 and this vehicle would have to be depreciated for tax purposes in the usual manner.
The $20,000 allowable deduction is also GST exclusive, therefore if the price is quoted at GST inclusive prices, you can make a purchase up to $22,000 ie $20,000 plus GST $2,000).
In order to be eligible for the full deduction the vehicle must be used wholly for business purposes. If the vehicle use is a mix of business and private the deduction can be pro-rated to show the break up between business and private use ie if you spend $20,000 on a car and 25% of the usage is private then the deduction claimable will be $15,000. To support the use between business and personal use, a log book should be kept in support to establish the breakdown of the deduction in the event of a taxation audit.