Best Car for 2016 Tax Deduction

best car for a one-off tax deduction in 2016

The Federal Government in Australia passed a new law in May 2015 allowing small businesses to claim an immediate tax deduction for assets costing less than $20,000.

This means, for example, a car costing less than $20,000 can now be written off in the year it was purchased, as a one-off tax deduction - rather than depreciating it over time.

Buying the right car without blowing the $20k cap is a great way to claim a significant tax deduction in the current financial year.

The new deductibility rules were an economy stimulating mechanism introduced to ramp up the economy without overheating an already red-hot Sydney housing market.

If you are a salaried employee, the best way to get peak tax deductibility on a car is via a novated lease >>

WHO CAN CLAIM?

Small businesses are eligible - generally that’s businesses with an aggregate turnover less than $2 million.

If you are self-employed or a small business, you can claim only the proportion of the cost of the asset used for business purposes. (In the case of a car, used 60 per cent for business and 40 per cent for personal purposes, you can claim 60 per cent of the (maximum $20k) cost of the car.

WHAT’S THE CHANGE?

Previously, only assets costing less than $1000 could be written off in one hit. Assets costing more than that had to be depreciated over time: 15 per cent of the cost was deductible in the first year, and 30 per cent of the depreciated value in subsequent years. (Assets including cars costing more than $20k are still depreciated over time in this way.)

HOW LONG WILL THE $20k DEDUCTION LAST?

The new law will cease on 30 June 2017. After that date, the previous regime of depreciating $1000+ assets will be reinstated.

HOW IS THE $20k CALCULATED?

If you are registered for GST, the GST-exclusive cost is the one you need to know. If the ex-GST cost is under $20k then you can claim the full amount in the current financial year.

THE CONTENDERS

Mazda2 Maxx
RRP $23,410*

best car for a one-off tax deduction in 2016

Body: Sedan or hatch
Safety: five-star
Warranty: 3 yr / unlimited km
Service: 12 mth / 10,000 km
Manufactured: Thailand
Economy: 4.9 L/100 km
Engine: 1.5-litre
Injection: Direct
Max Power: 81 kW @ 6000 rpm
Max Torque: 141 Nm @ 4000 rpm
Fuel: 91 RON unleaded
Auto: 6sp
Length: 4060 mm
Width: 1695 mm
Height: 1495 mm
Kerb weight: 1049 kg

For: Best technology, great dynamics, excellent packaging efficiency, features, and hybrid-like fuel economy.

Against: Can't match the South Koreans on warranty. Somewhat noisy inside. Has a space-saver spare tyre.

Hyundai i20 Elite
RRP $23,204*

best car for a one-off tax deduction in 2016

Body: Hatch
Safety: five-star
Warranty: 5 yr / unlimited km
Service: 12 mth / 15,000 km
Manufactured: India
Economy: 5.9 L/100 km
Engine: 1.4-litre
Injection: Multi-point
Max Power: 74 kW @ 5500 rpm
Max Torque: 136 Nm @ 4200 rpm
Fuel: 91 RON unleaded
Auto: 4sp
Length: 3995 mm
Width: 1710 mm
Height: 1490 mm
Kerb weight: 1149 kg

For: Great warranty & service interval. Full-sized spare.

 

AgainstDud 4sp auto and third-rate build quality from India. Only average to drive.

Kia Rio S-Premium
RRP $23,410*

best car for a one-off tax deduction in 2016

Body: Hatch
Safety: five-star
Warranty: 7 yr / unlimited km
Service: 12 mth / 15,000 km
Manufactured: South Korea
Economy: 6.3 L/100 km
Engine: 1.4-litre
Injection: Multi-point
Max Power: 79 kW @ 6300 rpm
Max Torque: 135 Nm @ 4200 rpm
Fuel: 91 RON unleaded
Auto: 4sp
Length: 4045 mm
Width: 1720 mm
Height: 1455 mm
Kerb weight: 1239 kg

For: Excellent warranty & service interval, full-sized spare. Good aesthetics. Reasonable standard features list.

Against: Dud 4sp auto, poor reliability predicted by Consumer Reports in the USA. Only average to drive.

Honda Jazz VTi-S
RRP $23,410*

best car for a one-off tax deduction in 2016

Body: Hatch
Safety: five-star
Warranty: 3 yr / 100,000 km
Service: 6 mth / 10,000 km
Manufactured: Thailand
Economy: 5.8 L/100 km
Engine: 1.5-litre
Injection: Multi-point
Max Power: 88 kW @ 6600 rpm
Max Torque: 145 Nm @ 4600 rpm
Fuel: 91 RON unleaded
Auto: CVT
Length: 3996 mm
Width: 1694 mm
Height: 1524 mm
Kerb weight: 1120 kg

For: Brilliant packaging efficiency, nice interior design and inoffensive exterior. It's a Honda.


Against: Third-rate engine, and fourth-rate CVT transmission. Space-saver spare tyre. Worst fuel economy of the quartet. Poor warranty and worse service interval.

*RRP above is the recommended drive-away price inclusive of fees and charges in NSW - automatic transmission vehicles in each case

COMMENT

The Mazda is the clear winner in the one-shot tax deduction stakes. It features the best engine and powertrain technology - exemplified by decent power and torque outputs delivered at lower revs than the Honda, and also delivering outstanding fuel economy. It's also great to drive and comfortable to sit in - even for longer distances, even for adults, even in the back. It's a small car, but it's certainly not cramped. (Take a look: Click the gallery images below to enlarge.)

The four-speed auto in the Hyundai i20 and the Kia Rio really is an embarrassment - a throwback in time with a use-by date that's been exceeded by at least a full decade. Well overdue for a revamp there. And the Consumer Reports reliability rating for the Kia Rio pegged it at 32 per cent below average - well outside the 'recommended' range. So, no cigars for the South Koreans in this market segment.

Prices in this report are all (obviously) the recommended drive-away price. In the case of the $23,410 Mazda2 Maxx auto, dealer delivery is pitched at $1995. That's a lot of hoot for bolting the rego plates on, washing the car, checking the vital fluids and a tank of fuel. If you negotiate that down to $1500 and take off the GST then you're hovering at about the $20,000 one-shot tax deduction limit.

If you can stomach the thought of driving a manual then the Mazda2 Genki is a potential target for the sub-$20k purchaser as well. Recommended drive-away price in NSW is $24,440 - once again there is about $1500 in wriggle room to slash from the delivery fee, and that gets you to about $23k. Take off the GST and you're at about $21k, and crunch the dealer for another $900-$1000 and you'll be driving away in the Genki, which really is a brilliantly equipped package. (Or wait for a retail special that does the hard work for you. At the time of writing there was a Mazda 2015 plate clearance sale in play that basically delivered a Mazda2 Genki manual for $22,690 drive away, and an auto for $24,690 - although even at these prices, crunching the auto down to under $20k ex-GST could take balls of steel in the dealership.)

Extra features on the Genki include: LED daytime running lights, chrome exhaust tips, LED headlamps, auto headlamps, rain-sensing wipers, sat-nav, active driving display, climate air-con, and black seat trim with red accents.

Mazda2 Buyer's Guide >>

MY SUB-$20k 'DON'T BUY' RECOMMENDATIONS

best car for a one-off tax deduction in 2016

FORD FIESTA: DON'T BUY

Ford Fiesta is a shitbox, any way you carve it up. Consumer Reports surveyed more than 740,000 new vehicle owners and found the reliability of the Fiesta to be an incredible 267 per cent below average.

This is the biggest red flag of all time. 

According to Consumer Reports, 41 per cent of Fiesta owners surveyed said they would not buy a Fiesta again. In Australia, Ford has a deplorable customer service track record. Do not buy a Ford Fiesta.

Why we need tougher lemon laws in Australia >>


best car for a one-off tax deduction in 2016

HOLDEN BARINA: DON'T BUY

Holden is transitioning from being a frontrunner in the Australian automotive landscape to being just another third-rate car company. As a consequence, Holden will be importing a great many vehicles from the old Daewoo factory in South Korea - the name and perception of which was so unbelievably on the nose that they had to change it from GM Daewoo to GM Korea. Bottom line: You can take the Daewoo out of the name, but you can;'t take the Daewoo out of the vehicles themselves.

Barina has a decent engine and transmission, but offers lousy economy - but the lousy build quality, third rate warranty and traditional Holden commitment to customer satisfaction (none) should be enough to steer you clear. (It's one of the few South Korean cars you can buy without getting a five- or seven-year warranty.)


best car for a one-off tax deduction in 2016

VOLKSWAGEN POLO: DON'T BUY

You'd get yourself a Volkswagen Polo Trendline DSG for about the same price as the Mazda2 Maxx. And Volkswagens are beautiful cars that drive really well. The 1.2 turbo engine can't really match the Mazda 1.5 in outright performance potential, but it is pretty strong in the mid-range. Given the recent Volkswagen scandal, however, buying one invites a depreciation disaster, and the DSG transmission has been a poisoned chalice for the brand. Volkswagen has also been verified independently as a below average reliability brand by Consumer Reports in the USA, and the Australian dealer network and the local importer (Volkswagen Australia) both have a deplorable track record of letting customers down - especially customers with valid complaints.

Inside the Volkswagen scandal >>

MORE CONSUMER REPORTS