Purchase a Motor Vehicle for Your Business and Immediately Write Off $5000

Do you have an older, inefficient, work vehicle you wish to replace? Are you thinking about buying an additional motor vehicle for the business? Or would you just like to buy a new motor vehicle as you need a change? If so then keep reading.

As of the 1st July 2012 the Federal Government introduced new legislation that provides an additional $5000 incentive to any small business* that purchases a motor vehicle in the 2012-2013 and subsequent income years.

The motor vehicle can be new or used and there is no minimum purchase amount.  Depending on your individual situation, this could possibly mean that your motor vehicle will be free for at least the 1st year.

Any vehicle used for  business purposes such as cars, trucks, vans, utilities and four wheel drives are eligible.

How does it work?

When you purchase a vehicle you are entitled to immediately write off $5000 in depreciation for any vehicle over $6,500.  In addition to this, the business can then depreciate the remaining value of the vehicle through the general small business pool at 15 per cent for the first year and 30 per cent for the following years.

Following are some examples provided by the ATO:

Example 1 – Flynn’s Courier Service is a small business entity and in the 2012-13 income year purchases a small second hand vehicle for $14,000 to assist with deliveries. The vehicle is only used for business purposes. Flynn’s Courier Service calculates its start year deduction in the following way:

$5,000 + 15% × ((100% × $14,000) − $5,000) = $6,350

In the 2012-13 income year, Flynn’s Courier Service can claim a deduction of $6,350 for the motor vehicle.  Previously, Flynn’s Courier Service would have only been entitled to claim depreciation of $3,500.00 for that year. 

Example 2 – Joe’s Computer Services is a small business and in the 2012-13 income year purchases a new motor vehicle for $30,000 to help with computer pick ups and deliveries. Joe estimates that 20 per cent of his use of the motor vehicle is for private purposes, and 80 per cent is for taxable purposes. Joe’s Computer Services calculates its start year deduction in the following way:

$5,000 + 15% × ((80% × $30,000) − $5,000) = $7,850

In the 2012-13 income year, Joe’s Computer Services can claim a deduction of $7,850 for the new motor vehicle. Previously, Joe would have only been entitled to claim depreciation of $5,400.00.

It gets even better for the Small Business Owner.  The depreciation rate that you can then claim in the remaining years has been increased to 30%, whereas it was previously 25%.

There has never been a better time to purchase a Motor Vehicle!

Despite the current economic uncertainty, one section of the economy that is going “gangbusters” is car sales.  This is occurring because we’re seeing the perfect conditions to purchase motor vehicles.  Interest rates on vehicle finance are currently at all time lows, the strong Australian dollar combined with the weak Euro and Yen is resulting in vehicles being unbelievable value.  Throw this recent incentive into the mix and you have the perfect recipe.  On top of this all the new vehicle purchases are resulting in an increase in second hand stock which is leading to great deals.

If you think it may be time to purchase a new vehicle or upgrade your fleet, we would love to help you with your funding.  Our guarantee is that we will provide you with the most cost effective finance available and at the same time ensure that your finance is structured in the most tax effective manner…all with a minimum of fuss.

Give us a call at any time if you would like to discuss your financing options..we’d love to help!

* A small business is defined as having a turn over of $2 million or less.

Finance options include:

  • Lease finance
  • Chattel Mortgage finance
  • Hire Purchase finance
  • Automotive finance
  • Fleet management finance

Contact Us now to find out more.

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ShayneArticle written by Shayne Fergus, Director of Capital Funding Group

If you would like to read more about Shayne Fergus please click here


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