Tradies can buy trucks on the taxman until the end of the year

Tradies can buy trucks on the taxman until the end of the year as $150,000 instant asset write off is extended by six months in another boost for the industry

By Charlie Moore, Political Reporter For Daily Mail Australia

Published: 23:52 BST, 8 June 2020 | Updated: 00:04 BST, 9 June 2020

The government has extended the $150,000 instant asset write off scheme until the end of the year.

The policy lets a business to buy as an asset worth up to $150,000 and immediately remove the cost from their profits, allowing them to pay less tax.

The previous limit of $30,000 was raised to $150,000 in March. It was supposed to revert back on 30 June but will now last until 31 December.

Treasurer Josh Frydenberg says the extension will cost $300 million and is expected to help about 3.5 million businesses.

‘They will be able to go and buy equipment or machinery, other materials for their business – up to $150,000 – and write it off straight away,’ he told Sky News on Tuesday.

The government has extended the $150,000 instant asset write off scheme until the end of the year

‘They can buy a pizza oven, they can buy a coffee machine, they can buy a new truck, a new tractor – they can buy new materials for their business.’

Mr Frydenberg hopes the policy will encourage businesses to grow and invest as they prepare to emerge from the coronavirus pandemic.

‘For a number of businesses it is very tough, but businesses aren’t just looking at today, they’re looking at tomorrow,’ he said.

The policy applies to businesses with annual turnovers of up to $500 million, up from $50 million.

Businesses can benefit from the instant asset write-off multiple times if they buy several assets which are each under $150,000.

The asset needs to be used or ready for use by December 31.

How write-off works: An Example

Peta’s Perfect Pastures Pty Ltd acquires a new tractor

Peta owns a company, Peta’s Perfect Pastures Pty Ltd, through which she operates a farming business in northern Tasmania. Peta’s Perfect Pastures Pty Ltd has an aggregated annual turnover above $50 million for the 2020-21 income year. On 1 August 2020, Peta purchases a new tractor for just under $150,000 exclusive of GST, for sole use in her business.

In the absence of the Government’s coronavirus economic response measures, Peta’s Perfect Pastures Pty Ltd would not have been able to immediately deduct the tractor, and instead would depreciate it over its effective life of 12 years.

Choosing to use the straight line method of depreciation, Peta’s Perfect Pastures Pty Ltd would claim a deduction of around $11,400. At the company tax rate of 30 per cent, Peta’s Perfect Pastures Pty Ltd would have paid around $3,400 less tax in 2020-21 income year as a result of the purchase.

Under the extended $150,000 instant asset write-off, Peta’s Perfect Pastures Pty Ltd will instead claim an immediate deduction of just under $150,000 for the cost of the tractor in the 2020-21 income year, approximately $138,600 more than under effective life depreciation. At the company tax rate of 30 per cent, Peta will pay around $45,000 less tax in 2020-21 as a result of the purchase.

This will improve Peta’s Perfect Pastures Pty Ltd’s cash flow and help Peta’s business reinvest and recover from the economic impact of the Coronavirus.

Read more at DailyMail.co.uk