In a letter to the federal treasurer Dr Jim Chalmers on behalf of franchised dealers, the Australian Automotive Dealer Association (AADA) CEO James Voortman said that although the federal budget was “sensible and appropriate” given the economic climate, he had concerns.

These relate specifically to the changes to the instant asset write off/accelerated depreciation package, the current arrangements of which are scheduled to end on June 30, 2023.

“As you may be aware, all vehicle manufacturers, to varying degrees, suffered delays in production because of a post pandemic computer chip shortage,” Mr Vootman wrote.

“While vehicle production has now started to recover, new vehicle supply has more recently experienced further delays caused by the requirement for quarantine checks at Australia’s ports.

“The effect of these delays, the degree of which is unprecedented, is that many customers are still awaiting delivery for new cars, vans, utes and trucks they ordered many months ago and it is common to hear stories of customers waiting for more than one year for their new vehicle. 

“Dealers are now sitting with the significant order books, many of which are scheduled to be delivered to small business customers which were due to make use of investment incentives.”

Mr Voortman said AADA members do not believe that it was fair to further penalise buyers for delivery delays beyond their control, or that of the selling dealers. 

“We ask that you please consider providing some form of dispensation allowing those who have entered into an agreement to purchase a vehicle prior to June 30, 2023, to be able to claim the accelerated depreciation irrespective of when they have taken delivery.”

The AADA has also written to the minister for small business, Julie Collins, with the same concerns.

WA-based accountants and business advisors Munro’s said that the instant asset write-off rules allowed for the immediate deduction for the cost of a depreciating asset for small business entities. 

“However, those rules were effectively replaced by temporary full expensing in relation to depreciating assets first held, and used or installed ready for use for a taxable purpose, between the 2020 Budget time (October 6, 2020) and June 30, 2022, then extended to 30 June 30, 2023,” the accountancy said.

“Given that temporary full expensing will not be available in 2023–2024, the instant asset write-off rules come back into play.”

It said that small businesses using the simplified depreciation rules in Subdiv 328-D of the Income Tax Assessment Act 1997 are entitled to an outright deduction for the “taxable purpose proportion” of the “adjustable value” of a depreciating asset if:

• The asset is a “low cost asset” (and is not an excluded depreciating asset); and
• The taxpayer starts to hold the asset when the taxpayer is a small business entity (and, for a limited period, if the taxpayer also qualifies as a medium sized business).

“The deduction is available in the income year in which the taxpayer first uses the asset, or first instals it ready for use, for a taxable purpose. The deduction is known as the “instant asset write-off”,” it said.

“A depreciating asset is a low cost asset if its cost as at the end of the income year in which the taxpayer starts to use it, or instals it ready for use, for a taxable purpose is less than the relevant threshold.”

By Neil Dowling