Small Business Qwners and the End of the Financial Year

Depreciation: The Long-Term Deduction

When your business buys an asset like a car, the Australian Taxation Office (ATO) understands that its value decreases over time – this is known as depreciation, or "decline in value." Instead of claiming the entire purchase price upfront, you generally claim a portion of this decline in value each financial year the car is used for business.

• How it works: You'll determine the business-use percentage of the car (often using a logbook to show how much it's used for work versus personal use). You then claim that percentage of the car's depreciation each year.
• The Car Limit: The ATO sets a "car limit" for depreciation. For the 2024-25 financial year, this limit is $69,674. This means even if your business buys a car for more than this amount, the maximum you can claim depreciation on is this limit. This also affects the amount of GST credit you can claim if your business is registered for GST.
• Records are Essential: To claim depreciation, your business needs to keep records of the car's purchase price, date of purchase, and maintain a logbook to substantiate its business-use percentage.

The Instant Asset Write-Off: A Timely Opportunity for Small Business

This is where buying a car before June 30, 2025, can be a particularly appealing strategy for eligible small businesses.

• What it is: The instant asset write-off allows qualifying businesses to immediately deduct the full cost (or the business-use portion) of certain eligible assets in the income year they are first used or installed ready for use.
• For the 2024-25 Financial Year: Small businesses with an aggregated annual turnover of less than $10 million can utilize a $20,000 instant asset write-off threshold per eligible asset. This means if your business acquires a car that costs less than $20,000 (and falls within the car limit), you could potentially claim the full business portion of its cost as a deduction in your 2025 tax return.
• Important Timing: This $20,000 limit applies on a "per asset" basis, so a business could write off multiple assets if each is under the threshold. For cars costing more than $20,000 but less than the $69,674 car limit, they would typically be depreciated through a "small business depreciation pool" at an accelerated rate, rather than an instant write-off.
• Act Now! The instant asset write-off is currently legislated to revert to a much lower $1,000 limit from 1 July 2025 for the 2025-26 financial year. This makes purchasing an eligible vehicle and having it ready for use before the end of this financial year (June 30, 2025) a valuable opportunity for businesses looking to benefit from the higher $20,000 threshold.