May 24

Instant Asset Write-Off: How to Deduct Your Vehicle

Australia’s end of financial year is fast approaching. Did you know that your business is likely eligible for the instant asset write-off? This means you could claim immediate deductions for the business portion of any assets used or purchased in the 2019/20 or 2020/21 financial year. As Australia’s most holistic car broker, we’re here to help you make the most of instant asset write-offs for any vehicle purchased for your business.

The instant asset write-off thresholds and criteria are constantly changing. This can make it difficult to determine your business’ eligibility and how much you can actually claim. Fortunately, The Vehicle Broker can help you navigate the entire process, from sourcing and buying a vehicle to claiming the maximum amount as a tax deduction, with your accountants tick of approval.

Let us source you a vehicle before the 30th June 2021 and you may be eligible to take advantage of the government’s instant asset write-off. Read on to learn more about how to go about claiming an instant asset write-off for your vehicle.

What is the Instant Asset Write-Off?

An instant asset write-off is an immediate deduction claimed by an eligible business for the business portion of the cost of an asset. However, this can only be done in the financial year when the asset is first used or purchased for use. You can claim instant asset write-off for multiple assets (so long as they equal less than the relevant threshold) and for new and second-hand assets, such as vehicles.

How Does The Instant Asset Write-Off Work?

Instant asset write-offs work by using a set of criteria to determine a business’ eligibility and its threshold. Thresholds can often change every financial year, so it’s important to refer to the ATO’s list of thresholds each year to be sure about how much you can claim.

There are four elements that impact a business’ eligibility and its threshold:

  1. Its aggregated turnover (total ordinary income)
  2. The date the asset was purchased
  3. The date it was first used or installed ready to use
  4. The cost of the asset must be lower than the determined threshold

Don’t forget: If your business has a total ordinary income of $500 million or more, you are not eligible for an instant asset write-off.

How to Apply an Instant Asset Write-Off to a Car Purchase

There are numerous things to consider when applying an instant asset write-off for a vehicle you’ve purchased for your business. This includes the car limit.

What is a car limit?

A car limit is one of the many limits and exclusions that must be considered when working out an instant asset write-off. This only applies to passenger vehicles designed to carry under one tonne or fewer than nine passengers.

The car limit changes from year to year, so be sure to check the ATO’s car limit totals every year. For instance:

  • $57,581 for the 2019/20 financial year.
  • $59,136 for the 2020/21 financial year.

How much can I claim on a car purchased in the 2020/21 financial year?

Your total instant asset write-off for a car purchase is determined by taking the percentage of business use from the total car limit in the relevant financial year. For instance, if you purchase a vehicle before the end of the 2020/21 financial year, your car limit will be $59,136. Say you use that vehicle for 80% business use, you can claim a total of 80% of $59,136, which equals an instant asset write-off of $47,309.

Due to the car limit, if your instant asset write-off threshold is $150,000 for the 2020/21 financial year, you can still only claim a total of $59,136 on your passenger vehicle.

Don’t forget: If your vehicle is not considered a passenger vehicle, the car limit does not apply and you can claim up to your threshold limit. So if you purchase an $80,000 vehicle for 100% business use that’s only transporting goods and your threshold is $150,000, you can claim the full $80,000 as an instant asset write-off.

How GST Can Affect an Instant Asset Write-Off

Any businesses registered for GST that can claim the full GST credit can also exclude the GST amount they paid when calculating car depreciation amounts. If you are only able to claim a portion of the GST credit, then the cost is reduced by that portion. This can often help businesses get the cost of their vehicle under the car limit for that year and claim the full amount (minus the GST). Businesses that are not registered for GST must include the GST amount they paid on the car when determining the instant asset write-off amount.

Instant Asset Write-Off: Do It Right With The Vehicle Broker

Claiming an instant asset write-off on a vehicle can be a daunting and complicated task. Businesses often don’t claim enough or wrongly consider themselves ineligible when they could actually be claiming a significant amount of money.

We can help you determine whether your business is eligible for an instant asset write-off and claim the most for any vehicles you’ve purchased in recent financial years. Are you looking for a new company vehicle? There’s still time to purchase new and used vehicles before the end of the 2020/21 financial year. These vehicles can then be used for an instant asset write-off. We can even help you source, negotiate and finalise the sale of individual or fleet vehicles.

Simply contact The Vehicle Broker today and start talking to the experts in car brokering and financing.