Investment allowance trap for new car buyers

Individual taxpayers who are employed and not in business, are being incorrectly advised by car salesmen that they will get the 30 percent investment allowance if they purchase a new car simply by applying for an ABN, says “Mr Taxman” Adrian Raftery.

Raftery said he has had a number of clients coming to him requesting an ABN number after they were told to do so by car salesmen in order to receive the Government 30 percent investment allowance.

“Whilst I hold their profession in high esteem, car sales people unfortunately do not have tax qualifications and will do almost anything to get a sale in this current environment” said Raftery, a Fellow of the Taxation Institute.

The 30 percent investment allowance, (part of the Government’s stimulus package) allows small business to receive an additional tax deduction on new eligible depreciating assets acquired between 13 December 2008 and 30 June this year.  Small businesses, with turnover under $2 million, have a minimum expenditure threshold of $1,000 whilst for other businesses a $10,000 threshold applies. It is limited up to luxury car limit of $57,180.

Raftery believes that the traps being used by car salesmen is wrong and taxpayers should be wary of falling into this trap. The tax incentive is only available for profitable business and not employed individuals.

Guidelines for the 30 percent investment allowance on new car purchases include:

  • It is only available to businesses
  • Must be a new car purchase (demonstrator vehicles included)
  • Business must claim car expenses under a “log book” or “one third of actual expenses” method to qualify.
  • 30 percent investment allowance only available up to luxury car limit of $57,180 (i.e $17,154 is the maximum investment allowance).

For more information, please visit the Treasury website

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