A vehicle can give you all kinds of new business opportunities, becoming one of your most important business assets. In fact, the potential for a vehicle to help your business grow is enough that the government offers tax benefits to make it easier—and rules being installed last year make it even easier for small businesses.
So what's the big change?
Starting 2015 and running through this year, small businesses that turnover less than $2 million per year can immediately deduct purchases worth up to $20,000. This is significantly more than the previous limit of $1,000 (anything larger had to be deducted over a time period of multiple years, deducting $1,000 per year).
This deduction is meant to encourage businesses to invest in assets for growth and includes things like tools and vehicles. It is limited to items in specific categories so check with a financial advisor before making any purchases.
What does this actually mean for you?
This means that if your business turns over less than $2 million you can purchase a vehicle for $20,000 or less and claim it as a tax deduction right away. The vehicle absolutely must be purchased for commercial purposes.
GST must be included in the $20,000 number for the car to be eligible but you can claim this deduction even if the car is bought through financing. If you purchase your vehicle before the end of June 2016 you can claim it on this year's taxes.
If you purchase a vehicle that costs more than $20,000 you will have to claim your deductions over the course of several years using the old depreciation rules. Speak with a trusted financial advisor to find out what exactly the rules are for the type of vehicle you want to purchase.
A vehicle for your business is a great investment, but it's also one of the biggest business purchases you'll ever make. Choose a vehicle that costs under $20,000 and you can use this tax break to lighten the load.