Tax deadline looms for new car buyers
Tradies have five weeks to cash in or miss out on a tax program credited with saving car dealerships during the coronavirus crisis.
Many Australian businesses have snapped up new utes and vans to take advantage of an accelerated depreciation scheme allowing them to instantly depreciate goods worth up to $150,000.
The deal expires on June 30, prompting automotive bodies to call for an extension to a program which has proved a lifeline for the car industry. Several manufacturers say it had a significant sales impact.
Car sales dropped to a 20-year low in April as buyers stayed home during the coronavirus pandemic.
But car makers are reporting a significant up-tick in interest leading into end of financial year sales, particularly in commercial vehicles such as the Toyota HiLux ute.
H&R Block tax spokesman Mark Chapman said for businesses considering investment in hardware such as vehicles, "now is the time to do it to get that big potential tax saving".
"At the moment with a lot of small business doing it quite tough, it is a way of reducing your tax quite substantially - if you can afford to actually go out and buy the assets in the first place," Mr Chapman said.
"You're compressing the entire deduction for the cost of the asset to one year.
"It's a really good way that you get your tax bill down in the year that you make these asset purchases rather than dribbling the deduction across four or five years."
A Treasury spokeswoman said the scheme is intended to provide "cash flow benefits for businesses" and that it expires on June 30.
A less generous accelerated depreciation program capped at $20,000 started in 2018, followed by an increase to $30,000 in 2019. Treasury is expected to announce plans for the 2020-21 program in coming weeks.
Mark Beitz, managing director for the Bartons Motor Group of car dealers, said the $150,000 cut-off has been "very good" for business.
"Anyone that has a car that's two or three years old, and they've got a business that's going OK, it's a good incentive or reason to buy a car," Mr Beitz said.
"It's a really significant motivator … it's definitely having a positive effect on commercial vehicles."
National Concrete Systems owner Craig Greenhill said "the stimulus was a huge incentive" to buy a new ute for his business.
The former NRL footballer paid about $32,600 for a Holden Colorado and plans to receive about $12,000 back when lodging his next business activity statement.
"When the incentive went to $150,000 I thought let's do it," he said.
"I wasn't sure about going into debt in this time, but the money was cheap to borrow and the deal was extraordinary."
Federal Chamber of Automotive Industries chief executive Tony Weber said the instant asset write-off program "helped to increase the level of inquiry through dealerships", while Australian Automotive Dealer Association chief executive James Voortman said "without the instant asset write-off, sales would have been a lot worse".
Mr Weber said the FCAI requested an increase in the $57,581 threshold "and an extension until the end of the next financial year".
While May sales data is not available yet, Mr Voortman said industry rumours suggested the tax scheme has had less of a benefit than originally anticipated.
"A limousine company, or a guy wanting to run tours in Toyota LandCruisers through the Simpson Desert, those sort of businesses wouldn't get the full benefit of depreciation with the changes," Mr Voortman said.
"There's been quite a bit of confusion on what businesses can claim, there's no clear direction."
Originally published as Tax deadline looms for new car buyers