Car costs slashed under business tax breaks

Gillard Government to provide small businesses with an instant tax write-off of the first $5k of vehicles purchased from 2012-13

May 9, 2011

Small businesses will be able to claim additional tax deductions for motor vehicles under new measures announced today by the Federal Government.

The Gillard Government will provide Australian small businesses with an instant tax write-off of the first $5,000 of any motor vehicle bought from 2012-13.

According to Australian Treasurer Wayne Swan, this extra tax relief will deliver real benefits by improving cash flows and helping operators to reinvest and grow their businesses.

For example, a tradesman – on a 30 percent marginal tax rate – buying a new $33,960 ute would receive an extra tax benefit of $1,275 in the year they purchased the vehicle.

The remainder of the purchase value can be transferred into the general small business depreciation pool, which is depreciated at 15 percent in the first year and 30 percent in later years.

This measure, which replaces the Entrepreneurs Tax Offset, is estimated to cost $350 million over the forward estimates and builds on the Government's existing tax reforms for small businesses to be introduced in 2012-13.

These include an immediate write-off of all assets valued at under $5,000 (up from $1,000 presently), and a write-off of all other assets (except buildings) in a single depreciation pool at a rate of 30 percent.

The Government is also introducing a reduction in company tax rate to 29 percent for incorporated small businesses. However, this figure is conditional on the passing of the proposed mining tax.

These tax reforms will be available to all small businesses (firms with 15 full-time equivalent employees or less) including sole traders and businesses operating through trusts, partnerships and companies.

The Treasurer will hand down the 2011-12 Federal Budget tomorrow.

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