Exclusions or Limits For Instant Asset Write-Off
Five main types of assets which are not eligible for full expensing are:
- ‘Expensive cars.’ This generally includes cars costing over $68,108 for the 2023-2024 financial year
- Assets located overseas
- Assets not used within a business
- Buildings and other assets are eligible for capital work deductions
- Some primary production assets already have an instant write-off scheme. This can include water facilities and fencing.
Instant Asset Write-Off Example: Car Limit
The car limit was implemented to prevent businesses from spending too much on luxury cars at a taxpayer’s expense. For tax purposes, motor vehicles that aren’t considered cars do not need to follow the expensive car limit. This means that commercial vehicles such as trucks, vans, and buses bought and used for business operations can be fully written off.
For example, let’s say a small office supplies business uses the simplified depreciation rule. The company purchased a luxury car designed to carry passengers in August 2020 for $95,000. Since they bought the vehicle before temporary full expensing was made available, the business would qualify to apply for instant asset write-off.
When they first used the car for business purposes, the instant asset write-off threshold was $150,000. The car limit at that time – in the 2020/21 income tax year – was $59,136. For this reason, the business could only claim $59,136 for the year ending 30 June 2021. No other depreciation rules can help them claim the excess cost of the vehicle.
Alternatively, larger utes can be referred to as commercial vehicles rather than cars. If the ute can carry a load over one tonne, it will not be regarded as a car. So the expensive car limit will not apply.
