Aussie tradies can buy a brand new ute and claim it on tax to get a much more generous refund than usual.
Treasurer Josh Frydenberg announced Tuesday evening that the immediate asset write-down plan would be extended until June 2023, adding another year to the time limit announced in the October 2020 pandemic budget.
“More than 99 percent of companies, which employ more than 11 million employees, can write off the full value of any eligible assets they purchase,” he told Parliament.
‘Tonight we will go further and announce the extension of these measures for another year until June 30, 2023, so that a trader can buy a new ute, a farmer a new harvester and a manufacturer can expand their production line.’
Aussie tradies can buy a brand new ute and claim it on tax to get a much more generous refund than usual
What is Immediate Depreciation of Assets?
The first immediate asset write-down, announced in the October 2020 budget, allowed companies to purchase assets worth $ 150,000 and claim them on tax
The program, officially known as ‘temporary full releases’, has been extended until June 2023
A company can claim an expense such as a car – worth $ 59,136 – over one fiscal year instead of eight
Before the immediate asset depreciation plan got underway late last year, a trader who bought a $ 40,000 Ford Ranger had to claim the price of the ute against their income tax for an eight-year period.
Under this scheme, officially known as the ‘temporary full expense’, a plumber or carpenter can claim the deduction from their income all at once.
Mark Chapman, tax communications director for tax agent H&R Block, said this meant that a business owner who made an annual profit of $ 200,000 could buy a ute of $ 40,000 and thereby reduce his taxable income to $ 160,000.
Compared to the old system of subtracting just $ 5,000 a year for eight years, the new instant asset depreciation would put the plaintiff off $ 35,000 better.
There is a limit on the amount due – business owners can only claim a deduction for a car worth $ 59,136 excluding GST, and that includes vans and motorcycles.
For non-automotive assets, the threshold is $ 150,000.
Before the immediate asset depreciation plan got underway late last year, a trader who bought a $ 40,000 Ford Ranger had to claim the price of the ute against their income tax for an eight-year period. Now it can be spread over just a year
But there is now no limit to the total cost of assets that can be claimed.
Instant asset depreciation can be used for a wide variety of assets, from new tables and chairs for cafe owners to laptops for accountants, along with EFTPOS machines, tools and equipment.
Accountant Ben Johnston, the director of Johnston Advisory, said small business owners should realize that they are not entitled to a refund of the purchase price of a new asset, but the purchase price will be deducted from their taxable income.
“They assume they’re spending $ 40,000 on an ute and it wipes $ 40,000 off their tax bill – it doesn’t,” Johnston told Daily Mail Australia.
Treasurer Josh Frydenberg announced Tuesday evening that the immediate asset write-down plan would be extended until June 2023, adding another year to the time limit announced in the October 2020 pandemic budget. put
“All the car yards and the big retailers have huge, big marketing campaigns that focus on the immediate amortization of assets, making people think they are getting a dollar-for-dollar savings with what they spend.”
Mr. Johnston warned that asset depreciation should not cause plumbers or carpenters to spend in the interest of new energy.
‘If you need that equipment, it’s brilliant. I just don’t find it tempting enough to spend that weren’t necessary, ”he said.
Companies that will incur losses in this fiscal year will clearly have no taxable income to deduct from, but under the extensive loss offset provisions announced in Tuesday’s budget, they can claim it retroactively against pre-Covid profits .
Struggling companies that made a loss in 2022 will be able to claim it against the profits they made in the years before the pandemic
This means that losses incurred up to 2022-23 can be offset against the taxes paid on the profit in the 2018-2019 financial year.
While some employees look at these provisions and think they can make money by setting up a business and getting paid as a “consultant” rather than a standard wage earner, Mr. Johnston said they should reconsider.
“It would be very, very dangerous to do that because it sets in motion a whole host of other rules, such as income from personal services,” he said.
It opens a can of worms in terms of occupational accidents, pension guarantee costs – the ATO has a real focus on people trying to be contractors, but are actually employees.
“It would be a huge no-no – it’s a big don’t.”