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Big $5,000 Tax Break for Australia’s Small Business

By Jeff Gross

Big $5,000 Tax Break for Australia's Small Business image 7027608495 daeb33feb74

First of all, there’s bunch of information today, way too many for common people to be able to track it all down. I always wondered if I’m missing something in wast sea of information which could be used to make entrepreneurial life a little bit easier. Yesterday I found a final answer. I am missing a lot in fact. Most of us do probably.

image source Flickr/Tax Credits

Hope you’ll find this useful for your biz. I reckon that this leaves some open possibilities as plenty of people aren’t in tune with current legislations so I guess there are some opportunities one can take advantage off but first we should get informed. If anyone has (or knows) a resource or legislative body site where we can inform regularly and get info about small businesses deductions please let me know, I’d appreciate it!

Now, while researching for a deal to renew our company car park I stumbled onto a page on used cars dealers site (Klosters) where I found out about this legislation which supposed to power small to medium sized businesses in Australia which my company was eligible for.

Apparently the legislation is still active and it will be through 2013 and I wanted to make fellow Australians to pay attention to it as it can mean a lot to them.

The legislation, which came into effect from the 1st July 2012, offers an additional incentive of $5000 to small businesses that purchase a motor vehicle. The car can either be new or used. According to the ATO (Taxation Office), small businesses which are eligible for the car tax write-off are those that have an aggregate turnover of less than $2M .

Which cars are eligible for the $5000 tax write-off?

The legislation covers any type of motor vehicle used for business, including cars, trucks, utilities, dual cab utes, vans, scooters and motorbikes. However, it excludes road vehicles whose main function does not involve public road use or whose ability to move on public roads are secondary to their main function, such as road rollers, tractors, graders, combine harvesters, trailers and earthmoving equipment.

How does this tax break work?

When you buy a car, you are entitled to an immediate $5000 write off in depreciation for cars costing $6,500. Besides this, the business can depreciate the remaining value of the car through the small business pool at 15% for the first year and then 30% for the following years. Here are some examples on how the tax break is calculated.

Example 1: If you have a small business that provides courier services and in 2013-14 decide to purchase a second hand motor vehicle for AUD 14,000 to be specifically used for business purposes, you can calculate your start year tax deduction as follows: AUD5,000 + 15% x ((100% x AUD14,000)- AUD5,000) = USD 6,350.

In 2013-14, your company can claim AUD 6,350 deduction for the vehicle.

Example 2: Assume you own a small business that offers computer services and in 2013-14 decide to purchase a new vehicle for AUD 30,000 to help with pickups and deliveries of computers.

If 20% of the vehicle usage is for your private purposes while the remaining 80% is for business purposes, you can calculate your start year deduction as follows: AUD5,000 + 15%