As part of its small business stimulus initiatives, the Federal Government last year introduced sweeping – and temporary – changes to the depreciation regulations for small businesses. This means that cars costing up to $20,000 might be wholly tax deductible for your small business, writes John Cadogan.
The new rules, introduced on May 12, 2015 and expiring on June 30, 2017, allow the business to claim the cost of plant and equipment up to $20,000 as a tax deduction in the first year the equipment was used or installed. Previously, only items acquired for less than $1,000 could be written off in this way. Items over this amount were depreciated at 15 per cent in the first year, and at 30 per cent of their diminished value thereafter.
It’s especially important in the case of cars to remember that only the proportion of the cost attributable to business use can be claimed. Also, if you are registered for GST then it is the ex-GST price of the car (that is, total cost minus GST) that determines the $20,000 limit.
If you are planning your end-of-tax-year financials over the next few months and you need a new car for the business, it is possible to purchase the car late in June and claim it in this current financial year.Here are four cars to short-list
Arguably the best car in this segment, the Maxx has an impressive array of standard equipment, offers hybrid-like fuel economy thanks to advanced engine technology, and is real fun to drive. Interior packaging is good, and four adults fit inside with (generally) few complaints. It can’t match the South Koreans on warranty and service intervals, and it offers only a space-saver spare tyre – which is alright in the city but something of a liability on the highway.
Honda Jazz VTi-S
Packaging is the Jazz’s Forte: it’s the one that makes the most use of the available space and offers the most versatile set of occupant/loadspace configurations. The Jazz can’t match the Mazda on advanced technology or fuel economy, however, and it’s not as much fun to drive. It also has a space saver spare tyre and suffers from comparatively high service costs.
Hyundai Accent SR
Accent SR is the sportiest drive among the four, offering really engaging suspension tune and a grunty 1.6-litre engine. Getting the auto under the $20k cap could be a stretch, but the manual shouldn’t be a problem. A great five-year warranty, capped price service for life and full-sized alloy wheel and spare tyre make the Accent SR a compelling $20k package.
Kia Rio S-Premium
The Rio is a good looking car with an outstanding seven-year warranty. It also has impressive standard features for the price, including a full-sized alloy spare wheel and tyre. Unfortunately it’s comparatively thirsty and suffers from a somewhat antiquated four-speed auto (in a field where six speeds is far more typical, not to mention smoother and more fuel efficient).
Things to be aware of
If you’re shopping for one of these cars, be aware that the recommended drive-away prices of most – especially the automatic variants – will be more than the Federal Government’s $20k one-shot deductibility cap. Bear in mind that the ex-GST price of the car is heavily negotiable (especially items like the hard-to-justify ‘dealer delivery’ fee).
Some assertive negotiation should see you coming in just under the $20,000 ex-GST limit – especially if you let the dealer know the sale depends on meeting this criteria for small business tax deductibility.