Cars and the instant asset write-off threshold

Q&A Tax

Question :

ABC Pty Ltd is an SBE and able to apply the small business capital allowance provisions in the 2017–18
income year.

The company acquires a Toyota van for $23,050 on 1 July 2017, however, the company pays only
$17,050 due to the $6,000 trade-in it gets on the existing van. The $23,050 acquisition cost includes
the following:

the cost of the van of $18,000;
the cost of accessories of $400;
dealer delivery of $1,000;
stamp duty of $550;
GST of $1,840;
vehicle registration of $760; and
insurance of $500.

The van has an estimated taxable purpose proportion of 75% for the 2017–18 income year.

Can the company claim an immediate deduction for the cost of van?

 

Answer :

Whether the car is under the $20,000 threshold?

The cost of a vehicle for depreciation purposes does not include registration, insurance or brokerage
amounts. ATO ID 2004/75

Therefore, the cost of the van will be $20,410, comprising the purchase price of the car ($18,000), the
accessories ($400), dealer delivery ($1,000), stamp duty ($550) and GST to the extent ITCs were not
claimed because the van will be used for private purposes ($1,840*25% =$460).

The $20,000 threshold applies to the cost of the car (including the market value of the van traded-in,
s. 40-185.) and not the taxable purpose portion of its cost.

Since the cost of the van for this purpose is more than $20,000, ABC Pty Ltd is not entitled to an
immediate deduction for the cost of the van. The van can however be added to the small business asset
pool.

Since the taxable purpose proportion of the van is $15,307 (i.e. 75% of $20,410), the deduction
allowable in respect of the van is $2,296 (i.e. 15% of $15,307) in FY2018.

Please note the threshold has change. If the company acquired the van and installed it ready for use on
or after 29 January 2019 but before 30 June 2020, it would be entitled to an immediate deduction of
$15,307. This is because the cost of the van is less than the applicable higher threshold of either
$25,000 or $30,000.

 

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