There’s been a bit of noise lately around the Government’s new tax incentive – a 20% immediate deduction on new plant, equipment, and vehicles. Sounds exciting, right? Especially if you’ve had your eye on a shiny new $50,000 ute or some flash new gear. But before you rush to the dealership, let’s break down what this actually means:
What’s the 20% deduction?
If you buy eligible new assets (like vehicles, tools, or machinery), you can now deduct 20% of the purchase price in the first year. So, for a $50,000 ute, that’s a $10,000 deduction. Not cash back – just a reduction in your taxable income.
At a company tax rate of 28%, that 20% deduction translates to $2,800 in actual tax savings. Handy, yes. Game-changing? Not quite.
Is it worth it?
That depends. If you were already planning to upgrade or invest in something that’ll genuinely improve your business, this is a bonus. But if you’re only thinking about buying because of the deduction, take a pause.
Ask yourself:
Can I afford it right now?
Cashflow should always come before tax breaks.
Will this make my business better?
A new vehicle might feel good, but will it actually help you serve more customers, finish jobs faster, or save money?
If the answer to those questions is "no" or "not really", then the instant deduction isn’t a good enough reason to buy.
Don’t let the tail wag the dog
Too often, we see businesses chase deductions and end up with gear they don’t really need. The tax benefit is there to support investment – not to justify unnecessary spending.
If you do need to invest, this 20% deduction is a genuine boost. Just make sure your purchase still passes the sniff test for business value.