Business Instant Asset Write Off Australia Explained

Business Instant Asset Write Off Australia Explained

Is Your Car a Tax Deduction? 

Is your car an instant asset write-off? Can you claim a tax deduction for that? How does this instant asset write-off thing even work?!?? These are a few questions that we get asked quite a lot here at MaxMyProfit so we have decided to take the time to answer these queries for you so grab a pen and a pad! 



Instant Asset Write Off 2021 Australia

A lot happened in 2020 and with the virus hitting our shores and essentially shutting the country down for a few months The Government had to rethink a lot of its strategy around stimulating the economy. 

One of these strategies was making amendments to what was called an instant asset write-off. Now, this policy was always there, and it worked up to $30,000 in value but, due to the pandemic, the government raised it to $150,000. This meant that you could buy things like big pieces of machinery and you could write them off in the financial year. 

Now there are a few cut-off dates for this. You must have purchased the equipment by the 31st of December 2020. Now, this seems like a missed opportunity. If you didn’t make a purchase before this date, then you’ve missed the boat. Well, there’s some good news! This scheme has been extended, but you must use the equipment or have it installed by the 30th of June 2021. So, if you’ve bought a piece of machinery or a car and you’re waiting on delivery make sure you push the company you bought it from and make sure they give you it before this date! If you can use it for business purposes before this time, then you can make a claim.

Having said that the instant asset write-off isn’t disappearing. They’ve actually changed the name of it to the ‘temporary full expense’. This came in in October 2022 and is valid until the 30th of June 2022. You can now buy equipment for your business; upgrade existing equipment and you can even buy second-hand equipment under certain circumstances. And it’s still valid up to $150k. 

Can you go and buy a Porsche or Ferrari or something crazy and get a full tax deduction?

This is a question that we get all the time and unfortunately, the answer is no. There are certain items in your expenses where they will either limit the amount or exclude it completely, so you have to get yourself up to speed on that. 

For the financial year of 2021, the cap on motor vehicles is $59,136.00 and it must seat less than 9 people and less carry less than one tonne to qualify. This is to stop people from rorting the system, it is there to stimulate the economy and for buying equipment for your business not so you can buy a sports car. If you’re buying a CNC machine or a forklift or something that’s 100% for business use then you won’t have any problems. 

Now, I’m not an accountant or financial advisor and I think you should get your own professional advice. 

You don’t get 100% of your money back, this is a common misconception of how tax returns work.

Think about it like this if your business is profitable and you made $100,000. If your profit and loss statement shows $100,000 in profit then you will pay the tax rate applicable to your company. For example, 27.5% so you’d pay $27,500.00 in tax. 

So, if you bought a piece of equipment at $100,000 you can put that into your books as an expense. Well, you can as long as it wasn’t a car that’s excluded! This $100,000 would then bring your profit down to zero and you would then pay no tax on it. 

Now, let’s say you bought a luxury car at $100,000 you could only claim $59,196 and you would still have to pay tax on the remaining amount as that is the maximum expense you can claim for a car. But, if you were to buy a truck that could carry 8 tonnes then you can put the full amount down as an expense as it is equipment for your business. 

Hopefully, this has helped you to understand how you can go about using expenses in your business to reduce the amount of tax you pay. But you also must consider whether your business is making a profit. If you’re not making a profit or you’re planning losses for the next few years, there isn’t much benefit in spending money for the sake of spending money. You don’t have any profits that are tax-deductible because you’re not making any profits as it is. 

I’d also like to say that even if you are profitable, you want to make sure that you need the equipment or you need the car before you go out and make the purchase. Ask yourself if the item is going to help your business. I’d much rather buy an appreciating asset after I pay tax rather than spend money for the sake of spending it! 

And of course, if your business is not profitable, guess what you need to do. You need to reach out, talk to somebody at MaxMyProfit about Business Coaching. The team here is ready to help you build the business that you imagine. Thanks for reading! 


1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)
Loading...

Leave a Reply

Your email address will not be published. Required fields are marked *

business plan template
#

Get Instant Access to the Business Plan Template that has helped thousands of Business Owners in every sector plan and grow their business.

Learn More
fees and benefits
#

Our Programs start from as little as $10 a day making it affordable for all business types.

Learn More

Top Rated Articles

How your company can adapt to the Digital Revolution

Over the last couple of years, technological innovation has brought about a rapid change in the customer service landsca

LEARN MORE

Will Marketing Automation Help Your Business Grow?

Marketing automation software can benefit your business in a number of ways. It is a great way to increase traffic, enco

LEARN MORE

How CRM Can Maximize Customer Lifetime Value (CLV)

"Keep your customers always on the frontline," this is a key philosophy to running a successful business. Customers are

LEARN MORE

Recently Viewed

The Top 10 Business Parks in Sydney

Sydney is Australia’s corporate capital and holding any kind of business event, either national or international, li

LEARN MORE

6 Service Principles That Will Help you Serve Clients Better

6 Service Principles That Will Help you Serve Clients Better We live in the age of the customer. In the current day, th

LEARN MORE

7 Morning Rituals of 7 Highly Successful Entrepreneurs

What makes an entrepreneur successful in life and in business? Successful business owners like Richard Branson, Steve Jo

LEARN MORE
  • Over the past 6 months the incredible team at MMP have supported us to shift our attitude towards our business & month on month our revenue is increasing to the point we will be able to employ additional staff to support our business goals long into the future. Do not regret our decision one single bit!

    • Emma Reece

  • Working with my coach has enabled me to see the areas where my business is failing. This was pretty confronting to me to be honest. MMP has the tools to improve these areas and the guidance on how to implement them.

    • Sharon Robinson

  • I have been working with Max My Profit for approx 3 years now, and over that time I have learnt a lot of things about not only what it takes to run a business, but I have also learnt things about myself. I don't believe i'd be the person or have the business I have today if it wasn't for Max My Profit and our Business Excelerator. Great team to work with if you want to take your business serious!

    • Ben Choy

  • As a new client for Max My Profit (MMP) it has taken no time at all to realise the benefits of business coaching. Despite many years of senior management experience starting a new business requires best practice systems and processes built on a solid platform of detailed planning. I look forward to the benefits of adopting the formula being shared by MMP.

    • Campbell MacLeod

  • Max My Profit Are truly awesome at what they do. They have helped me over the past 12 months to get off the tools in my business and start working on my business. I am looking forward to 2019 with enthusiasm not concern. Thanks so much.

    • Aaron Kemp

  • If you are committed to Growth the Max My Profit Team has the tools and expertise to excelerate all areas of your life. They Care, They Listen, They Understand You as an Individual first then they focus on Your business. Thank you Max My Profit my rating is a 6/5 - Kindest Regards The Mr Handyfix Team

    • Catherine Kavadas

  • The team at Max My Profit are an absolute pleasure to deal with. I love working with a team who is on top of what they are doing and have a clear view of what they are working on with you and helping ensure you get to the end goal.

    • Lauren Watts

  • I have been working with MaxMyProfit over the years and what they do for SME's in growing their business is fantastic. Also due to there knowledge and their supporting material for companies across the 5 lifestyle stages and assisting them through this process day in day out is extremely comforting as a small business owner and have referred them many businesses over the years.

    • Steve Laingy

  • Working with a business coach from MaxMyProfit has been one of the best things I have done for my business. I had several other coaches before MaxMyProfit but these guys are a step above the others. I have seen a significant increase in sales, now have a business that can run itself and the coaching program has paid for itself many times over.

    • Matthew Kitchin

  • Much more than just business coaches. There is an absolute treasure chest of business knowledge in their members site.

    • Iain Campbell

  • Max My Profit are unique as they really partner with you to develop and implement a plan that will drive success for the business. I was hesitant to proceed as previous business coaches tell you what to do and rely on you to implement.

    • Michael de Haan

  • I attended one of Max My Profits introductory events in Melbourne. Having been an accountant for almost 30 years, I was somewhat sceptical. Boy was I wrong. I not only enjoyed the presentation, but I gleaned so much from just that session.

    • Daniel Odd

  • These guys are an absolute wealth of knowledge for Small Business. The programme and support networks they have set up ensure learn more every day and can take your business from good to great. Thanks so much.

    • John Butler