If you’ve put-off your decision to purchase new business vehicles because you were not in a position to take advantage of the Instant Asset Write Off initiative (IAWO) by the 30 June 2020 deadline, think again. The measure has been extended to 31 December 2020.
The Instant Asset Write Off initiative was a key component of the initial coronavirus stimulus package for business announced by the Australian Government in March.
We covered the issue in detail at that time but we’ll now recap the details and explain how the extended timeframe can benefit an estimated 3.5 million businesses.
IAWO: Pre, During and Post Pandemic
Before COVID-19 came to dominate our lives, under the tax regulations, the threshold to write-off, ie claim a tax deduction, on the purchase of businesses vehicles was limited to $30,000.
In order to stimulate the economy and provide incentives for businesses to invest, as part of the stimulus package for business announced in March 2020, the threshold was increased to $150,000 for businesses with an annual turnover of up to $500 million. The deadline for this measure was that the asset had to be in operation by 30 June 2020..
The measure was reasonably well-received at the time, but as the coronavirus pandemic grew, the reality of how many businesses would be in a position to take advantage of it, became starkly obvious.
Tighter COVID-19 restrictions were put into place across the country to limit the spread of the virus and many businesses were forced to close for initially, an unknown length of time. In addition to those forced to close, many others closed voluntarily or experienced a serious downturn in turnover as the majority of the population were ordered to ‘stay home’.
In that type of trading situation, many businesses were simply not in a position to make any investments in business vehicles and many reluctant to do so before the deadline of 30 June 2020. The assets, ie vehicles had to be purchased by 30 June 2020.
As restrictions began to be lifted in early June, some many months earlier than originally anticipated, businesses were clearly in a better position to resume their business investment plans but had missed the chance to have purchases in place by 30 June.
Recognising this situation, on 9 June the Government announced an extension of the IAWO to 31 December 2020. This means that businesses will need to purchase business vehicles, either new or second-hand, and have them in operation in the business by 31 December 2020 to be eligible to claim the tax deductions.
The Treasurer, Josh Frydenberg and Senator Michaelia Cash, the Minister for Employment, jointly issued a statement saying this extension would allow businesses the extra time to purchase and install the assets and improve their cash flow by bringing forward tax deductions.
According to the pair, the measure is designed to support business to stick with their investment plans and support the economy.
What IAWO Means for Your Business
For a start, if you’d put your plans to buy new cars for your business on the back burner, it could be an idea to put those plans on the hot plate! Effectively you have until 31 December to purchase the cars and have them in your business. But there is another reason to accelerate the process – EOFY sales.
Many car dealers have end of financial year sales running through June and July so you could score a great deal on purchase price plus have the benefit of the asset tax deduction. This initiative only applies to business car buyers not consumers.
The IAWO measure applies to individual assets. That means businesses can purchase a number of vehicles to claim on, as long as they are valued under $150,000 to be eligible for the IAWO.
The original fact sheet issued by Treasury in March details some case study examples which may assist you better understand how your business can benefit from IAWO. Just swap out the deadline of 30 June to 31 December. We are awaiting on the relevant legislative changes for the release of an updated fact sheet to post.
Sourcing the Right Car Finance Deal
In regard to finance, Jade Car Loans offers the full range of commercial finance products for business vehicle purchases. As detailed on our web pages, each offers a range of benefits to different business structures and objectives. We advise you consult with your accountant as to which finance type is best suited to your individual business then speak with one of our consultants for quote.
You’ll be keen to move fast to take advantage of both IAWO and EOFY and Jade Car Loans, as independent car finance brokers, are well-placed to offer fast car finance approvals and expedite the entire loan process.
To discuss the options for your car finance requirements contact us on 1300 000 003 to speak with a Jade Car Loans consultant.
DISCLAIMER: THE INFORMATION PROVIDED IS FOR GENERAL CONSIDERATION. ANY REFERENCE TO OFFICIAL GOVERNMENT POLICIES HAS BEEN SOURCED FROM AUSTRALIAN GOVERNMENT AND STATE GOVERNMENT SOURCES. NO LIABILITY IS ACCEPTED FOR ANY ERRORS IN PRESENTATION OR INTERPRETATION OF THE FACTS AS PROVIDED BY THESE SOURCES. WE ADVISE ALL INDIVIDUALS AND BUSINESSES TO REFER TO THEIR ACCOUNTANT OR FINANCIAL ADVISOR FOR PROFESSIONAL ADVICE SPECIFIC TO THEIR INDIVIDUAL CIRCUMSTANCES.