At tax time this year, cars and light commercial vehicles driven for business use will be eligible for certain write-offs under the Temporary Full Expensing scheme. Here is how it works.
The Australian Taxation Office (ATO) has extended its write-off scheme for business expenses and the good news is that some vehicles are elgibile for temporary full expensing. The cut off for this has been extended until 30 June 2023.
There are differences between passenger cars and commercial vehicles, and thus differences in what and how much can be written off. We look at what the rules are for this financial year below.
This is not financial advice and any person or business intending to make purchases and deductions for tax purposes should speak to a financial advisor and have their tax returns completed by a licensed accountant.
What’s Temporary Full Expensing?
Temporary Full Expensing allows certain businesses to write-off the total cost of some business-use items without any threshold. This includes light commercial utes and vans with a carrying capacity of over 1000kg and that are not primarily designed to carry passengers.
That means it excludes some utes, such as those which carry less than one-tonne and have seating for five. This would be considered primarily as a passenger-carrying vehicle, not a workhorse ute, and it would come under the passenger car threshold (more below).
To be eligible, the vehicles must also be held (delivered) prior to June 30 2023.
Can I write off the full cost of a passenger car for business use?
Under Temporary Full Expensing, the total cost of certain light commercial vehicles can be immediately written off provided it meets the above criteria. Passenger cars, therefore, are not eligible for the threshold-free limit of a light commercial vehicle. However, they are covered under Temporary Full Expensing to an instant asset write-off limit of $60,733.
Can car accessories and mods be written off?
If you make improvements to the vehicle, those costs can also be written off if they were installed during the same tax year. The improvements must also be reasonably expected as required for the vehicle’s business use.
Is my business eligible?
According to the ATO, eligible businesses for temporary full expensing must meet one of the following:
- a business with an aggregated turnover of less than $5 billion
- a corporate tax entity that meets the alternative income test
The ATO goes on further to explain that for the 2022-23 income year: “an eligible entity can claim in its tax return a deduction for the business portion of the cost of:
- eligible new assets first held, first used or installed ready for use for a taxable purpose between 7.30pm AEDT on 6 October 2020 and 30 June 2023″
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