June is here… which means June 30 is not far away and tax time is around the corner.
The immediate asset write-off scheme (IAWO) used to be a great way for businesses to save some cash on big purchases (including cars), but the 2023-24 Federal Budget has introduced new The important update is effective for the fiscal year ending June 30.
But what is the immediate asset write-off plan? And what do those changes mean for businesses?
What is the immediate asset write-off plan?
First introduced in 2011, the instant asset write-off program allows eligible businesses to claim an immediate deduction for the business expense portion of an asset in the year the asset is used or installed. Book for the first time.
In other words, the work-related portion of a new car can be considered a tax deduction, thereby reducing the business’s taxable income.
Before the program is implemented, businesses will have to depreciate assets gradually over a period of several years.
The IAWO program sees similar businesses receive a full tax credit at the end of the purchase/installation fiscal year.
IAWO can be used for new assets or old assets acquired during the financial year of the forgiveness request that are worth less than a specific price threshold.
Many assets can be written down up to that $20,000 threshold.
The criteria and thresholds for instant asset write off have changed over time and the 2023-24 Federal Budget announced in May 2023 includes a series of updates to the scheme.
What’s changing for the fiscal year ending June 30, 2024?
Due to detailed changes in the 2023-24 budget, fewer businesses will be eligible for immediate asset write-offs this tax season, and those that are eligible may not be able to claim as much as before.
At one time, businesses with up to $500 million in revenue were eligible to use the program with immediate debt forgiveness on both new and used vehicles, but that threshold has since been removed. down to $10 million in annual revenue.
Until June 30, 2023, the program allows a new device worth up to $150,000 – $65,000 for cars that seat less than nine or carry less than one ton – to be claimed immediately instantly.
The total claimable value is currently only 20,000 USD.
Business vehicles purchased before 30 June 2023 but delivered at the beginning of this financial year are subject to the new immediate asset write-off threshold and all business vehicles delivered from that date are subject to following the same rules.
Any vehicle valued at $20,000 or more must be depreciated at a rate of 15% in the first year of income and 30% for each year of income thereafter.
In the latest budget detailed in May 2024, the Federal Government announced a 12-month extension of the $20,000 instant asset write-off until 30 June 2025.
Why is it important?
Now it is much more difficult to remove a work vehicle with just one blow.
Utes and trucks are among the most popular commercial vehicles, and no new vehicle is priced below the $20,000 threshold.
That means businesses requiring these vehicles will be forced to look to the used market if they want to reap the benefits of the asset write-off scheme immediately.
In fact, the only new cars below that threshold are the MG 3 and the Kia Picanto, both of which are small hatchbacks that offer little for traditional car enthusiasts. However, these cars still served a purpose for the business after the company fled.
Businesses that choose to ignore the changes and ignore the new Ford Ranger and Toyota HiAce models will face a cash flow hit due to the stricter thresholds.
Larger businesses are currently completely excluded from the scheme and must depreciate commercial vehicles over a period of three years or more.
Disclaimer: The information on this website is for general purposes only and is not a substitute for professional financial advice. Car expert advises you to seek independent legal, financial, tax or other advice specific to your personal circumstances.
