Let’s get stimulated

As we all know 48 hours is a long time in politics and I found this out the hard way last month when I took a punt and forwarded my article on the Small Business Tax Break for publication.

Even though I had observed that Treasury were revising estimates faster than patients were queuing for elective surgery, I didn’t predict the further generosity of the tax man announced in the budget on the 12th May.

After all we’d been softened up for weeks to expect “a horror budget” and I’d put a few bucks odds on that cigarettes and alcohol would cost more.

I’d even tried to save a few dollars on budget night by buying a bottle of sauvignon blanc on the way home from work because surely it would go up in price the next day.

But I was wrong on both counts and I didn’t expect that the government would do Robin Hood in reverse and increase the Small Business Tax Break to a 50% rebate that would now continue up to the end of 2009.

Even more generously the government would also increase the rebate on items you’ve already purchased since 18th December 2008 just in case you had any doubts about how much you’ve been stimulated.

You see I’d been convinced by our pollies that this was only going to be a short recession and it wasn’t even one “we had to have”.

Whilst most pundits were also surprised to see that the retirement age had crept up to 67, I’d already predicted this as politicians always stay well past their use by date, so why not the rest of us as well.

With such an excellent health care system in Australia we’ll all be living longer anyway as long as the next generation start exercising more, lose weight and stop eating junk food.

And with us all living longer wouldn’t it be a good idea if we halved the concessional treatment of superannuation right at the time when most funds have halved in value with the stock-market crash.

Yes, it all makes sense to me.

But there was one other point in my article which I was sure would come back to haunt me.

It was my comment that demonstrator vehicles wouldn’t qualify for the tax break because they were not “new”.

As we all know cars are not delivered in cryovac and with the new car market now down by 24% there are lots of 2008 build cars out there.

The tax office doesn’t usually care how “old” a car is when it’s sold because it is only officially born into the taxation world when it is first registered.

The makers of German cars don’t like to let the world know that they are discounting their stock because that shatters their veneer of scarcity and most narcissists would rather boast about how much something cost them rather than talk about how much money they saved.

So there have always been a lot of ex-company German vehicles out there with very low kilometres which are essentially anything they can’t sell, registered and sold at a discount.

But the Tax Break is all about stimulating the economy to consume more and the government has made it clear that they will not accept that a car that a salesman has been driving home every night is actually “new” when you or I buy it.

I received many emails on this topic and as I write this I have been advised that the tax office have a fact sheet on the subject ready to go, but it won’t be released until the new increased allowances are passed into law.

If this turns out to be like the Alcopops Tax we could be waiting for a while, especially if this legislation is bundled up with something more controversial such as the changes to the rebate on private health insurance.

So for what it’s worth the prudent advice from my accountant is to steer clear of demonstrators, especially demonstrators with more than a few miles on them.

He’s never been wrong before and unlike this author his disclaimer ensures that you could never sue him anyway.

Practice points:

The Tax Break is not reduced for partial use of the vehicle provided it was principally purchased for carrying on a business.

The cost base for depreciation is not affected by the rebate and therefore deductions of up to 150% of the purchase price (less the GST) are possible.

Safe motoring,
Dr Clive Fraser

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    Medical Motoring is an online record of the articles written by Dr Clive Fraser and published in the Australian Medicine magazine by the Australian Medical Association.