Preamble
The car limit under section 40-230 of the Income Tax Assessment Act 1997 (ITAA 1997) [1] for the 2018-19 financial year is $57,581.
In July 2018, Laura buys a car for $60,000 to use in carrying on her business. The car is of a type to which the car limit applies. As Laura started to hold the car in the 2018-19 financial year, in working out the car's decline in value for the 2018-19 income year, the first element of cost of the car is reduced to $57,581.
This Determination applies for the financial year commencing on 1 July 2018.
Appendix 1 - Explanation
'Car limit' has the meaning given by section 40-230. It is used for the purposes of applying various provisions, including working out the first element of cost of certain cars when calculating their decline in value. [2]
The car limit is indexed annually in line with movements in the motor vehicle purchase sub-group of the Consumer Price Index [3] , unless the indexation factor is 1 or less. [4] An amount is indexed by multiplying it by its indexation factor. [5]
The indexation factor for amounts that are indexed on an annual basis is calculated as: the sum of the index numbers for the quarters in the year ending on 31 March just before the start of the relevant financial year / the sum of the index numbers for the quarters in the year ending on the previous 31 March [6]
The sum of the index numbers for the quarters in the year ending on: • 31 March 2018 was 373.0, and • 31 March 2017 was 376.7 resulting in an indexation factor of 0.990 (rounded to 3 decimal places [7] ).
As the indexation factor is less than 1, there is no indexation of the car limit.
The car limit for the 2018-19 financial year therefore remains at $57,581.