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Steve Bragg

THE instant tax write-off provisions for small-to-medium businesses contained in the Coalition budget handed down this week provide dealers with an opportunity to increase sales as the government widens the opportunity to include vehicles up to $30,000 (previously $25,000) and increases the number of businesses eligible for the benefit.

From budget night, April 2, until June 30, 2020, the government will increase the instant write-off threshold from $25,000 to $30,000.

In addition to small businesses with an aggregated annual turnover of less than $10 million, medium businesses (with an aggregated turnover of more than $10 million but less than $50 million) will also be eligible for the write-off.

This will directly assist motor dealers in three ways:

  1. Extend the price range of vehicles that fit into the new limit.
  2. Greatly extend the number of businesses that can buy vehicles under this measure.
  3. Provide far more motor dealers with this instant asset write-off for their own businesses, in which they previously could not participate as their turnover was beyond $10m, despite them actually being small businesses.

Commenting on the implications of the budget, the national lead of KPMG Motor Industry Services, Steve Bragg, told GoAutoNews Premium: “The Australian economy is slowing, yet the government is expecting the economy will rebound to its potential rate next year on the back of improving household consumption expenditure, business investment and public expenditure.

“For the rebound to occur, the treasurer’s forecast relies on Australia lifting its productivity by between one and 1.2 per cent annually to achieve its forecasted real GDP growth.

“While the wave of transport infrastructure currently being built around Australia should positively contribute to productivity, the government’s enhanced and expanded policy towards accelerated depreciation (instant write-off) for small-to-medium businesses could further help turn Australia’s stagnant productivity performance around, assuming the nearly 3.5 million SMEs take the incentive on offer and purchase new assets.

“We also know that if those SMEs spend that allowance on new hi-tech capital then labour productivity is likely to be boosted further. Increasing productivity, lifting the capital-labour ratio and employing more hi-tech assets should also lift real wages in the process.

“Dealers should be looking to market this to customers holding ABNs in the run up to the financial year ending June 30. With the expansion to medium-sized businesses, dealers with commercial vehicles – utes, vans, etc – can especially target tradies and other small and medium businesses. Don’t forget that company drive cars less than $30,000 would qualify as well.

“Dealers should not overlook taking advantage of the instant write-off themselves. Parts and service utes could be replaced at dealerships as well as any assets purchased from April 2, 2019 until June 30, 2020.”

But Mr Bragg warned that it was important that dealers and their customers discuss the asset purchase with their accountant to ensure it qualifies for the accelerated depreciation as it could have a significant impact on the decision.

KPMG MIS example of how SMEs can benefit:

Business (ABN holder) with turnover of less than $50 million purchases a ute to be utilised in the business on April 15, 2019. The ute has a total cost of $30,000. The business has taxable income for the financial year ending June 30, 2019.

The asset purchased as an instant write-off (assuming tax rate at 30 per cent) will reduce the taxable income for the business by $30,000 and the tax payable by $9000.

Mr Bragg added: “The business (ABN holder) must maintain separate tax and accounting depreciation schedules to ensure they account for the deprecation correctly in their accounting and tax records as there will be a ‘temporary difference’ in the tax and accounting records for the assets that have utilised the instant write-off provision.”

By John Mellor

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