She may not look like it, but Gemma Munro is one of “Tony’s tradies”.
Ms Munro would like to take advantage of the government’s new incentive for small businesses to spend up on equipment, by buying a car for at least one of her nine employees at her growing business mentoring company, Inkling Women.
“It’s something I’m absolutely considering, even for team members as part of their salary package,” Ms Munro said.
“For us it’s a little bonus to help with expenses. We’ve doubled almost every year since we started in 2011 and it’s almost a reward to help our expansion.”
If she does use the government’s new $20,000 instant asset write-off for small businesses to buy a new car, Ms Munro will be contributing to a surge in purchases that retailers expect will fuel economic growth and lead to record new car sales this financial year.
The nation’s second largest car retailer AP Eagers, which sells 4 per cent of new cars and owns dealerships for 25 car brands across the country, expects new small car sales to push past the previous high of 1.14 million, set in 2013, by June 30 this year.
AP Eagers managing director Martin Ward estimates 200,000 new cars are sold each year at or below the $20,000 threshold — the “sweet spot” for small businesses to claim the instant asset write-off on equipment, including cars, against their tax bill.
The measure, announced in Tuesday’s budget, is aimed at businesses with turnover of less than $2m.
Tony Abbott yesterday claimed the catchphrase — “Tony’s tradies” — to describe the small businesses that will benefit from the changes, in an echo of the “Howard’s battlers” who helped John Howard to election victory in 1996, ending 13 years of Labor rule.
Mr Ward said low interest rates had already driven new car sales to record highs.
He said he believed the tax incentive would also include used cars, with the price bracket of $18,000 to $20,000 the most popular in the company’s dealerships.
Mr Ward predicted the small-business incentive would have less impact on car sales than accelerated depreciation introduced in the federal Labor government’s 2009 stimulus package to counter the GFC. But it would more than counter losses car retailers experienced when tighter rules on the fringe benefits tax created a sharp fall in vehicles sold under novated leases two years ago.
“Between now and June 30 the whole of Australia will be peppered with all sorts of ads relating to this space,’’ he said.
The measure is unlikely to be enough to stimulate sales of Australian-made cars as production winds down towards 2017 with Toyota’s Camry, Ford’s Falcon and Territory and Holden’s Commodore models valued above $20,000.
Holden’s base Cruze model, assembled at South Australia’s Elizabeth plant, may fall within the criteria.
CMV Group joint managing director Paul Crawford, who owns Australia’s second largest Toyota dealer, said the move would likely stimulate small-car imports and have a negative impact on Australia’s balance of payments but would stimulate profitable small businesses that had money to spend on equipment.
But more information was needed on whether the $20,000 incentive included on-road costs, used cars and GST before models such as the HiLux utility could be included in the mix, he said.
Mr Crawford said the move could also improve road safety, as most small car models had higher safety ratings and new tax rules would favour fuel-efficient cars, also found in the small-car classes.
Rules introduced in this budget have flattened the cents-per-kilometre accounting method used to calculate work-related car expenses to a 66c-a-kilometre deduction that “gives a nod” to smaller cars, he said.
South Australian small business commissioner John Chapman said the $20,000 tax incentive would encourage small businesses to spend, and could also help stimulate the automotive industry. But he warned that some small businesses should be careful to “spend wisely”, ensuring they only splashed out on assets that would help them grow.
“I’d be concerned if everyone went on a spending spree or were driving new cars that didn’t add value to their business,” Mr Chapman said. “If they spend it wisely they’ll get the business benefit and the tax benefit.”
The incentive supports business owners such as Ms Munro, who recently doubled her office space and is considering buying a new couch, along with additional IT equipment.
As published in The Australian, 14 May 2015. Written by Verity Edwards.
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