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Understanding Vehicle Depreciation

2025-08-03

At New Town Toyota, we know that running a business is all about smart decisions—and when it comes to investing in a vehicle, timing can make all the difference. As we approach the end of the financial year, it’s the perfect time to take a closer look at vehicle depreciation, and how your next purchase or service could work in your favour at tax time. If you’re a business owner or sole trader, understanding depreciation isn’t just helpful—it’s essential.

What Is Vehicle Depreciation?

Put simply, vehicle depreciation is the reduction in your car’s value over time. From the moment a vehicle leaves the dealership, it begins to depreciate—but the good news is, if you’re using that vehicle for business purposes, this depreciation can often be claimed as a tax deduction.

Make & Model

Toyota vehicles are known for their reliability, quality, and strong resale value. Popular models like the HiLux or RAV4 Hybrid tend to hold their value longer because of their high demand in both personal and commercial markets.

Condition & Maintenance

A well-serviced vehicle with a clean interior and exterior depreciates more slowly. That’s why keeping up with your scheduled Toyota service can actually pay off in the long run.

Kilometres Travelled

Lower kilometres usually mean higher value—especially when paired with a solid service history.

Accessories & Modifications

Accessories and upgrades like leather interiors, tray liners, or safety packs can sometimes add value, especially when fitted using Toyota Genuine Accessories.

Fuel Efficiency

With rising fuel costs, fuel-efficient vehicles—particularly Toyota Hybrid models—are increasingly attractive on the resale market. Particularly RAV4 and Corolla Cross.

Demand

High-demand vehicles (think: HiLux, Prado, LandCruiser 300 Series) tend to depreciate slower. If they’re in short supply, even better for resale.

Claiming Vehicle Depreciation at Tax Time

If you use a vehicle for business purposes, you may be eligible to claim depreciation as a tax deduction. The ATO provides two key ways to do this:

Simplified Depreciation Rules

(for businesses with turnover under $10 million)

Instant Asset Write-Off

This allows eligible businesses to immediately write off the full cost of a vehicle (or accessory) under a certain threshold—rather than depreciating it over several years.

Small Business Pooling

If the asset exceeds the write-off threshold, you may still be able to claim deductions by placing it in a general depreciation pool.

General Depreciation Rules

Businesses over the $10 million threshold (or those not using simplified rules) can calculate depreciation using either:

The prime cost method, which spreads deductions evenly over the vehicle’s effective life
The diminishing value method, which allows for higher deductions earlier on

Speak to your accountant to work out which is right for you and what the ATO defines as the effective life of your vehicle.

Why Timing Matters

End of Financial Year isn’t just the time for stocktake sales and budget reviews. For businesses, it’s also the last chance to make smart investments that can improve cash flow, vehicle performance, and tax outcomes.

Whether you’re purchasing a new car, servicing your current fleet or Adding accessories to boost performance doing it before June 30 can make all the difference.

TIP: Purchasing before June 30 means you can potentially claim the deduction in this year’s return.

Ready to Talk Business?

At New Town Toyota, we have a wide range of in-stock vehicles, from HiLux and LandCruiser to Hybrid SUVs like the RAV4 and Yaris Cross, ready to drive away before EOFY. We’re here to help you choose the right vehicle and guide you through options that could benefit your business now—and in the years ahead.

Disclaimer: The information in this article is general in nature and does not constitute financial or tax advice. Please consult a qualified accountant or tax advisor to understand what applies to your specific situation.