Hockey stick­ers

The Trea­surer put new work ve­hi­cles on the Bud­get agenda — here are the picks of the $20K bunch

The Advertiser - Motoring - - FRONT PAGE -

ve­hi­cle that costs more than $20,000?

With some help from those in the know we’ve man­aged to zero-in on the best and worst case sce­nar­ios, and sort fact from fic­tion.

For starters, the gov­ern­ment will not write you a cheque for $20,000 if you buy a new car, as some be­lieve.

The changes also do not ap­ply to pri­vate buy­ers, who typ­i­cally ac­count for more than half of all new-car sales. Fur­ther, the cri­te­ria for small busi­nesses and sole traders are tougher than many may re­alise — and the deal doesn’t last for­ever.

The $20,000 thresh­old for goods that can be used as an im­me­di­ate tax de­duc­tion (rather than spread over eight fi­nan­cial years, in the case of mo­tor ve­hi­cles) ap­plies to “as­sets ac­quired and in­stalled ready for use be­tween 7.30pm 12 May 2015 and 30 June 2017”.

El­i­gi­ble busi­nesses must turn over more than $20,000 and less than $2 mil­lion an­nu­ally, the real es­tate as­sets of the busi­ness must be worth more than $500,000, other as­sets must worth be more than $100,000, and the busi­ness must have made a profit in three of the past five years. The aim is to pre­vent rort­ing.

The amount each small busi­ness or sole trader may be en­ti­tled to as a tax re­fund will vary — even on iden­ti­cal ve­hi­cles — be­cause the pur­chase price of the as­set is counted against tax­able in­come.

In a best-case sce­nario, sole traders in the top tax bracket of 47 cents in the dollar could be el­i­gi­ble for a re­fund of up to $8500 on a $20,000 ve­hi­cle used ex­clu­sively for work. Small busi­nesses taxed at 30 per cent could pocket up to $5400 — pro­vid­ing quar­terly tax in­stal­ments or pay-as-you-go taxes are up to date.

“If peo­ple are rush­ing to buy a new car they need to con­sider the non-com­mer­cial loss pro­vi­sions which ap­ply to their busi­ness,” says char­tered tax ad­viser Amar Deep.

In sim­pler terms, he says: “If your busi­ness is mak­ing a loss, you can’t use that loss to off­set your em­ploy­ment in­come and get a Tax Of­fice re­fund.”

Mean­while, deal­ers are scram­bling to find out which ve­hi­cles fall un­der the $20,000 thresh­old, and how far cus­tomers can stretch the limit.

The ATO says the as­set must cost not a dollar more than $20,000.

How­ever, that amount is ex­clud­ing GST, mean­ing the most ba­sic $20,900 drive-away tray­back utes are el­i­gi­ble.

Fur­ther, given there is no GST on reg­is­tra­tion or stamp duty, an el­i­gi­ble ve­hi­cle in the­ory could be priced be­tween $21,500 and $22,000 drive­away, which will bring in some small vans from Citroen, Re­nault and Volk­swa­gen.

Ac­ces­sories fall into a grey area. For ex­am­ple, ex­perts we’ve spo­ken to say you could in the­ory add a larger ute tray or other ac­ces­sories — tak­ing the ve­hi­cle be­yond the $20,000 thresh­old — pro­vid­ing they were on a sep­a­rate tax in­voice.

If the dealer was pre­pared to split the in­voice, al­ready a com­mon prac­tice with some fleet leas­ing ar­range­ments (where the in­di­vid­ual and the em­ployer pick up dif­fer­ent parts of the tab), then you could ar­guably drive away in a $30,000 ute or van loaded to the hilt.

But you wouldn’t be able to buy, for ex­am­ple, a $60,000 SUV and sub­mit three $20,000 tax in­voices to off­set against your tax­able in­come. Work ve­hi­cles dearer than $20,000 will be de­ductible over eight years, as per usual.

The $20,000 thresh­old ap­plies to any goods, so it doesn’t even have to be a new car. For ex­am­ple, it can be a used ve­hi­cle, or a small hatch­back for a pizza de­liv­ery busi­ness or se­cu­rity com­pany. But the amount you may get as a tax de­duc­tion de­pends on how much the ve­hi­cle is used for work and what your (or your com­pany’s) tax­able in­come amounts to.

Un­der­stand­ably, the in­dus­try has wel­comed the Bud­get ini­tia­tive, not least be­cause it has jump-started show­room traf­fic be­fore June, his­tor­i­cally the big­gest month for new-car sales.

“We ap­plaud the gov­ern­ment’s small busi­ness ini­tia­tive,” says Pa­trick Tessier, chief ex­ec­u­tive of­fi­cer of the Australia Au­to­mo­tive Dealer As­so­ci­a­tion, rep­re­sent­ing 4000 fran­chises.

“We be­lieve small busi­ness needs a stim­u­lus and we think this will have an im­me­di­ate ben­e­fit.

“Our deal­ers are al­ready re­port­ing a spike in in­ter­est in show­room traf­fic and phone calls. There is a lot of in­quiry about what th­ese changes mean

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