The Federal Government has recently announced its plans to further extend its instant asset write-off scheme for eligible businesses as part of the 2020 Federal Budget.
However, it’s important to keep in mind that despite these changes, the car limit for motor vehicle purchases must still be applied. The car limit is the maximum depreciation expense you can claim for a motor vehicle.
The car limit is:
$57,581 for the 2019–20 income tax year.
$59,136 for the 2020–21 income tax year.
The instant asset write-off for a motor vehicle is limited to the business portion of the car limit for the relevant income tax year.
For example, the car limit is $59,136 for the 2020–21 income tax year. If a practitioner operating as a sole trader was to use their vehicle for 75% business purposes, they are able to claim 75% of $59,136, being $44,352 under the instant asset write-off provisions.
Importantly a log book must be maintained in order to determine the applicable deductible business use portion for not only the cost of the motor vehicle but also the ongoing associated running costs.
As the legislation currently stands as at the date of publication, eligible businesses looking to access the instant asset write-off must have used the vehicle, or had it delivered ready for use, between 12 March and 31 December 2020.
The team at Cutcher & Neale are here to help, please get in touch if you would like further assistance.
