Federal Budget 2023: Tradies hit with $130K asset write-off ute cut
Tradies and other small businesses will lose out on tax deductions for new vehicles after the federal government dramatically cut its asset write-off claim amount.
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Tradies will find it harder to get behind the wheel of a new ute under changes to the popular instant asset write-off scheme.
The Albanese government has slammed the brakes on the amount small business can claim for a piece of new equipment – down from $150,000 to $20,000 – making it impossible for businesses to instantly claim the cost of new commercial vehicles as a tax deduction.
The change also reduces the number of businesses that can fast-track their cashflow.
Having previously applied to businesses with a turnover of up to $500m, the scheme is now restricted to small businesses that make less than $10m per year.
Treasury figures show up to 3.8 million businesses will be able to access $290m in cashflow support through fast-tracked tax returns.
The change takes place from July 1, which could trigger a rush on commercial vehicles in dealer showrooms.
Supply of new vehicles remains delayed by production backlogs, component shortages and biosecurity measures.
Federal Chamber of Automotive Industries chief executive Tony Weber said the timing of the change could also impact businesses that had placed orders more than a year ago.
“The cost of that vehicle was predicated on there being stability of policy,” Mr Weber said.
The instant asset write-off threshold has had a bumpy road, bouncing from figures as low as $1000 in 2014 to $150,000 at the height of the coronavirus pandemic.
The automotive industry spokesman said generous concessions would be missed.
“Instant asset write-off has made vehicles more affordable and that’s good for economic growth,” Mr Weber said.
Australian Automotive Dealer Association chief executive James Voortman said he was disappointed the asset write-off had been scaled back, saying it helped businesses obtain more modern vehicles.
“The instant asset write-off has resulted in many small businesses being able to purchase new vehicles for business use,” he said.
“This has played a major part in ensuring Australia’s vehicle fleet is characterised by newer vehicles, safer vehicles and cleaner vehicles.”
The scheme has helped four-wheel-drive utes such as the Ford Ranger and Toyota HiLux, Australia’s best-selling cars, maintain their place in the fast lane of vehicle sales charts.
There was good news for four-wheel-drive fans in Tuesday’s budget, which promised not to introduce punitive emissions laws driving utes off the road.
An upcoming new fuel efficiency standard, part of the Albanese government’s National Electric Vehicle Strategy, will set out targets for the next generation of new vehicles in Australia.
While the standard has not been set, budget papers promise future laws will be written with regional Australia in mind, promising “the utes and four-wheel drives that Australians love can continue to be sold”.
“Manufacturers will have greater incentives to add to the range of electric utes, SUVs and four-wheel drives by developing new models,” it said.
The government has released a consultation paper for its upcoming emissions standard, seeking comment from carmakers, motorists and the wider automotive industry.
Incentives for plug-in hybrid vehicle will be also be phased out earlier than planned under changes to electric vehicle tax breaks.
The change takes the asset write-off scheme near to its 2019 levels and above the $1000 default version of the instant asset write-off scheme, which was set to kick in after the current uncapped scheme expires at the end of June.
In addition, the government will roll out an energy incentive scheme for businesses with a turnover up to $50m, offering an additional 20 per cent tax discount on assets and equipment that are more energy efficient or support electrification.
The scheme will offer up to $20,000 bonus tax deductions for expenditure up to $100,000.
New fridges, heat pumps, electric heating or cooling systems, batteries and thermal energy storage systems will be eligible. However, it will not be extended to cover electric vehicles, solar panels or renewable electricity generation assets, capital works, or assets that are not connected to the electricity grid and use fossil fuels.
The budget also contains funding to trial an independent review for small businesses in disputes with the tax office, as well as removing duplication of paperwork for single-touch payroll lodgements, by allowing employers to provide tax agents with the authority to act on their behalf.
Small businesses that have failed to lodge their tax returns will also be encouraged to so under an amnesty program expected to raise $275.4m. Businesses with a turnover of less than $10m will be offered an amnesty on penalties for outstanding tax statements covering the period between December 2019 and February 2022.
Judo Bank chief economist Warren Hogan said small businesses were facing labour shortages and cost blowouts and lacked the scale to deal with it.
“Although, the overall business conditions in Australia are pretty damn good, the economy has slowed a bit,” he said.
“I do worry what is going to happen if we do get the inevitable rough patch.”
Mr Hogan said small and medium business would have to bear the brunt of the slowdown, but noted it “would not be uniform”.
“You will see some parts in certain industries really struggle,” he said.
Originally published as Federal Budget 2023: Tradies hit with $130K asset write-off ute cut
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