Why now is the right time to claim a vehicle on your tax

The end of the financial year (EOFY) is fast approaching, and business owners have less than a month remaining to arrange the purchase of a new vehicle and claim temporary full expensing.

It's a great time to be buying a car for your commercial needs, because you'll reap the benefits of bargain buying in the EOFY sales, and then claim the temporary full expensing on top of that, as soon as you like.

As we have reported previously, the federal government is fully supportive of business owners purchasing a new car or commercial vehicle and claiming the depreciation immediately using the temporary full expensing concession, previously known as the instant tax write-off.

The government initiative is aimed at keeping the economy ticking over through the tough times, and particularly benefits businesses also planning to make the most of heavily discounted stock available during the usual end-of-financial-year sales.

To qualify, the business may earn up to $5 billion, which opens up the concession to a lot of companies.

If the vehicle costs up to $150,000 and is purchased before July 1, the business can claim the vehicle’s depreciation immediately for the 2020-21 financial year.

But if you’re planning to buy a passenger car or a light commercial vehicle, do be aware of the depreciation limit that applies and the definition of a ‘car’. You will likely find that the Ford Ranger Raptor to tow your personal water craft at weekends is deemed a passenger-carrying vehicle by the ATO. And of course you can only claim that proportion of the vehicle's purchase price that's specifically work-related.

That limit of $59,136 for the 2020-21 financial year will buy a fair chunk of sheet metal, however. And that’s particularly true as car companies begin to roll out clearance sales for the end of the financial year. From next financial year, the depreciation limit rises to $60,733.

All in all then, it’s time to get cracking. Check the appropriate Australian Taxation Office web page first and naturally check with your accountant as well.

Related reading:
Temporary full expensing FAQs
Five vans you can write off on your tax now
Five light trucks you can write off on your tax now

This article was originally published as a news story in June 2020 and has been updated with the latest information from the Australian Taxation Office.