The government has announced a limited extension to the instant asset write-off threshold to $20,000, from 1 July 2023 to 30 June 2024. The meagre $20,000 threshold will likely exclude most vehicles on dealers’ lots and it’s not currently clear if it includes used (second hand) vehicles. The write-off will apply to small business entities with an aggregated turnover of less than $10 million. To be eligible, the asset must be first used or installed ready for use between 1 June 2023 and 30 June 2024. The $20,000 threshold will apply on a per asset basis, allowing small businesses to write-off multiple assets.
These proposed rules are significantly less liberal than the previous more expansive temporary full expensing measures that applied to all businesses with turnover less than $5bn from 6 October 2020 until 30 June 2023.
Dealers and their customers need to be acutely aware that for the temporary full expensing rules to apply to a vehicle purchase, the delivery will need to take place (ready for use) prior to 30 June 2023 for the asset to qualify. All vehicles delivered post 30 June 2023, despite when they were ordered, will not qualify for the temporary full expensing measures, and will qualify to the normal rate of depreciation allowed. In simple terms, if you’re waiting for your new car for work and delivery cannot take place until the new financial year, you cannot take advantage of the current full expensing measures.
The good news is, it’s a call to action for dealers and their customers to take delivery immediately to qualify for the temporary full expensing measures available until 30 June 2023. Dealers will need to do everything in their power to get these vehicles currently on order delivered for their customers.
The current shortages of new vehicles due to production, supply chain and bio security delays means many businesses have not and will not be able to take advantage of the temporary full expensing measures before it expires in the next 6 weeks.
This change will have a significant impact on large fleets, large corporates, brokers, etc. that have vehicles on order and undelivered causing them to lose out on the tax deduction they would have otherwise been entitled to claim. As this is a big risk for these customers, dealers are better off prioritising these deals in the next 6 weeks, so they don’t burn these large customers.