25 Jul

Who Are You Getting Your Tax Advice From?

Posted at 10:12h

Advertisements on the internet might use buzzwords from the taxation and superannuation industry to pique your interest. However, they can be misleading in how they represent your actual benefits.

An advertisement for a car on the internet could point out that if you buy it (a $150,000 car) in your business, you would be entitled to the Instant Asset Write-off. While this statement is technically correct, it is also misleading in how the Instant Asset Write-off works.

Under current tax law, if you are a business and purchase an asset to use in your business, you can get a tax deduction for the full value of the asset. This is as opposed to depreciating the asset over a number of years.

The same applies to cars. If you purchase a car now, you can get an instant tax deduction (as opposed to depreciating the car over a number of years. However, your tax deduction is still limited to the car cost limit (which sits at around $60,000). So, while the advertisement is technically correct, the most that you could claim as a tax deduction on that $150, 000 car is $60,000.
Plus, after the car is purchased you may also have a fringe benefits tax liability every year based on the full value of $150,000. This means that you’d miss out on the tax deduction but would still pay the fringe benefits tax, which restricts the tax advantages of providing cars as an employee benefit.

Other organisations may benefit from tax-effective buyers purchasing their products. While the advertising is often technically correct, it can be misleading in how it is represented. We suggest always coming to us for tax advice or clarification on your actual benefits.

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