Why do you need to order your motor vehicle now to claim a tax deduction in 2023?

Dummy Blog Post 2

If you’re planning to purchase a motor vehicle in the 2023 financial year to claim the purchase as a tax deduction under the Temporary Full Expensing measures, you may need to get your order in now.

COVID-19 has created many unusual economic circumstances and problems as unintended consequences of policies and shutdowns.

The current complexity small businesses need to consider is the timing of purchasing motor vehicles. 

To claim a tax deduction (either in full or with depreciation), you need to have had the asset “installed and ready for use” before 30 June. For a car, this means you must have taken delivery of the vehicle prior to 30 June of the year you’re claiming the deduction.

With many car dealers quoting wait times between 9 and 18 months, the implications for small businesses are significant.

Consider ordering a vehicle on the 1 July 2022, intending to claim it in FY2023 as a fully expensed claim. If the car arrives within 12 months, by 30 June 2023, you will be entitled to the deduction. 

But if it arrives in 13 months, you won’t be able to claim the purchase until FY2024. At the time of writing, we don’t know what provisions will be available to businesses, your option may be to depreciate only (resulting in an average of a quarter of the claim you may have been planning to make).

So, what are your options?

  • Commit to purchasing a used vehicle off a lot, knowing you have guaranteed the deduction (noting that the prices for used cars are also rising due to the pressures on the new vehicle deliveries).
  • Order as soon as possible to ensure you guarantee your deduction.
  • Order on your own timeframe, but do so without relying on the tax deduction in your 2023 tax planning until the vehicle arrives.

Remember, this situation arises only due to the current Temporary Full Expensing measures, which currently end on 30 June 2023. Should these provisions be extended, then the benefit would push out to the 2024 financial year.

If you read this and want to talk about the implications and plans for your business vehicle fleet, I’d love to hear from you. Book a time to work with me now.