Business vehicle finance tax benefits can markedly reduce the cost of a new vehicle purchase. Benefits through tax deductions are available at all times, on all business finance products, subject to meeting Australian Taxation Office (ATO) criteria and regulations.
But currently, there is an additional measure available only for a limited time that may offer even more significant deductions and benefits to eligible businesses. Temporary full expensing offers significant extra business vehicle finance tax benefits for new vehicles but is only available until 30 June 2023.
Business owners and operators that would like to capitalise on this opportunity are reminded of the timeline and encouraged to move on new vehicle acquisitions with the suitable finance product. Stock availability for new vehicles has been a major obstacle for purchasers. But according to the FCAI, the most recent sales figures tend to indicate an easing with the supply situation.
Now could be the ideal time to check out the availability of the preferred vehicles, speak with us about suitable finance and ensure the acquisition meets the timeframe for temporary full expensing eligibility.
General Tax Benefits on Business Vehicle Finance
Forms of business vehicle finance tax benefits are of course always available. Certain elements and costs of finance are tax deductible either directly or via depreciation of the motor vehicle. The specific tax deductible elements vary with the different finance products.
Here’s a summary of tax benefits for the two most popular forms of business vehicle finance:-
- Business Vehicle Lease: The monthly lease payment is treated as a business expense and therefore fully tax deductible. That includes the interest portion of the payment. GST is applied to lease payments, not the interest portion, and claimable on the relevant Business Activity Statement.
- Chattel Mortgage Vehicle Finance: The monthly finance payment is not fully deductible. The interest portion of the payment is considered a tax deduction. A tax deduction is realised through the depreciation of the vehicle’s value. The amount of the annual depreciable deduction is per the ATO schedule at the time. GST is charged on the vehicle purchase price and the full amount can be claimed on the next Business Activity Statement.
Current Limited Time Tax Benefits - Temporary Full Expensing
The current limited-time measure, which offers significant business vehicle finance tax benefits for new vehicles, is of course, temporary full expensing. The key word to note at the moment being ‘temporary’. This offer is coming to an end very soon – at the end of the 2022/23 financial year.
The potential tax deductions can be significant and may be a very welcome cost relief come tax time, especially when considering new business vehicle finance. Especially with many businesses facing higher costs in supplies and constraints on production due to the tightness in the labour market.
Temporary full expensing allows for the whole amount of the purchase price of new business vehicles to be depreciated in full in the same year that the vehicles were purchased. That can be a much great tax deduction on taxable income for 22/23 compared with under the normal depreciation scheduling.
The deduction would be realised when the accountant prepares the business income tax return. By reducing the taxable income by this larger amount, less tax would be payable compared with if a smaller deduction was available.
Facing a smaller tax bill in the latter part of the year may be extremely welcome by many business operators. Easing pressures on cash flow which may offset those rising operational costs. Operators should check the criteria for eligibility for their business and the vehicle being purchased.
A discussion with the accountant is also advised as the choice of business vehicle finance is critical to being able to take advantage of this tax benefit. This is an asset acquisition tax measure and as such, all types of business vehicles may be eligible.
Suitable Business Vehicle Finance - Chattel Mortgage
To be in a position to realise the temporary full expensing tax benefits on business vehicle finance, including abn car financing, the vehicle must be a depreciable asset. For that purpose, Chattel Mortgage Business Vehicle Finance is considered the most suitable loan type.
Chattel Mortgage is a secured loan where the vehicle ownership is immediately transferred to the business buyer on settlement of the purchase and the finance. With ownership, the business lists the vehicle as an asset in the books and claims tax benefits via the relevant depreciation schedule.
This is one of, if not the most widely used form of business finance for many assets. For those considering this opportunity, the added attraction is that Chattel Mortgage attracts a lower interest rate compared with Vehicle Leasing.
Your Jade Car Loans consultant can arrange pre-approved vehicle finance to assist with budgeting and planning which vehicle to purchase.
Contact Jade Car Loans at 1300 000 003 for cheaper business vehicle finance.
DISCLAIMER: IN REGARD TO MISREPRESENTATIONS AND ERRORS CONTAINED IN THE MATERIAL AS PRESENTED, LIABILITY IS NOT ACCEPTED. THE DETAILS AND CONTENT IS PROVIDED FOR CAR BUYERS AND INDIVIDUALS AND BUSINESS SEEKING FINANCE PURELY AS GENERAL INFORMATION. THIS IS NOT PROVIDED AS THE ONLY SOURCE OF FINANCIAL INFORMATION. ANYONE THAT CONSIDERS THAT NEED FINANCIAL ADVICE ABOUT THEIR SPECIFIC REQUIREMENTS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.