Tax changes herald ute windfall

PRICES of new fleet-friendly sedans, hatchbacks and utes went on the chopping block this week as the federal budget opened a tax deductible windfall to Australian businesses.

Small business operators and car retailers together suddenly became winners in a fully tax-deductible asset incentive included in this week’s budget.

The tax-deductibility applies to any asset – new or used – that has a gross cost of less than $20,000. In the case of a vehicle, it must cost less than that sum inclusive of options and all on-road costs.

National automotive retail giant AHG’s managing director Bronte Howson told GoAuto that the move would “certainly provide some further stimulus to the retail automotive industry”.

“There is an incentive for manufacturers to address the opportunity by positioning new vehicles at or below the price point,” he said.

“The same incentive exists for dealerships to position used vehicles at the same level.” Mr Howson said AHG was trading strongly with support from manufacturers, a low-interest-rate environment and “ultra-competitive pricing”.

“The move by the federal government will provide further stimulus to the retail automotive industry and to other retailers,” he said.

“The industry is trading towards a record result for new-car sales and the budget move certainly supports that forecast.” Rumours that Toyota Motor Company Australia planned a sub-$20,000 on-road price for its fleet-friendly Corolla small car proved untrue.

But Western Australia-based John Hughes Group director John Hughes said he would sell the Mitsubishi Lancer for $19,990 driveaway, together with commercial vehicles.

JHG is the national importer for the Chinese-made ZX Auto Grand Tiger utility, which is now priced at $19,990 driveaway for a 4WD tray-back diesel.

The group is also selling a ZX Grand Tiger two-wheel drive single cab and tray model for $16,990 and a dual-cab variant for $18,990, including on-road costs.

Mr Hughes said today he would clear existing stock of the recently superseded Mitsubishi Triton two-wheel drive tray model for $19,990 driveaway.

“I will also sell the Lancer for $19,990 as a drive-away price as well,” he said. The Lancer is listed at $18,990 plus on-road costs.

Mitsubishi Motors Australia Limited head of corporate communications Shayna Welsh said all its vehicles were above the $20,000 threshold, adding that there were no plans to change the current prices.

Mr Hughes said the budget contained positive decisions that would promote small business and the vehicle incentive was an important part of that.

The other ute manufacturer with a sub-$20,000 drive-away price on its products is Indian brand Mahindra Automotive Australia.

Mahindra's public relations and marketing manager James Halliwell said the budget’s tax incentive was a timely injection for small businesses.

The car-maker is offering a diesel single-cab tray model of the Pik-Up for $19,990 driveaway and a $19,990 price on its Genio single-cab tray model.

“The trades-oriented Genio has a larger 2.7-metre tray and a higher 1.2-tonne payload than the Pik-Up which has a 2.4m tray and standard diff lock and is more designed for agricultural work,” he said.

“But we expect a lot of business from our tractor range that has models that suit the tax incentive starting at $12,990.” Most activity was expected in the new ute sector but one of the cheapest makes on the market, Great Wall, has no stock.

“No, there’s no stock at the distribution centre but some dealers may have some vehicles,” said spokesman for the Asian brands of Sydney-based Ateco Automotive, Daniel Cotterill.

The Budget announcement, made on Tuesday, covers new and used vehicles and is part of a three-pronged tax-break move by the federal government to stimulate small businesses operating work vehicles.

The $20,000 immediate asset deduction is supplemented by a small business tax cut of up to five per cent for sole traders and other unincorporated businesses, and a tax drop from 30 per cent to 28.5 per cent for incorporated firms with quarterly Business Activity Statements.

The third benefit is a change in the work-related car expense deduction that now fixes the ownership costs at 66 cents a kilometre. It previous ranged from 65c/km to 77c/km depending on the size of the vehicle.

Though unlikely to be opposed, the only snag in the Budget proposal is that it has to pass through the Senate.

If opposed – or even hinted that it will be knocked back by the senate – buyers must consider the possibility that the asset they bought can no longer be fully tax deductible.