Buying Vehicle in Company/Trust

After discussing this with my accountant today he recommended I purchase a vehicle in my Company/Trust.

Here are some benefits that he mentioned, hopefully I have recorded this correctly and will have to touch base again prior to buying.

Of course you should probably get your own advice on this.

He also suggested chattel mortgage, still need to look into this.

Pros
There are tax deductions up to $59,008
Can claim 18.5% depreciation pa
FBT exempt if claiming business use
Record mileage in log book for first 3 months and this covers you for 5 years
All costs pertaining to maintenance, insurance etc. is tax deductable
Claim back GST on purchase

MTR

 

What proportion do you think will be business vs private use?

 

It must be 100% business otherwise you will have FBT and it probably wont be worth it??

Not an expert in this area, perhaps one of the experts can elaborate.

I have been looking at this option for a while as I have had varied information, but pretty sure I will be going down this route when purchasing a vehicle

MTR

 

Good luck logging 100% business use.

pinkboy

 

This. Or Hilux.

 

Yep. Hard to do unless you are dealing on property related matters every minute of the day. You will trigger all sorts of yellow (if not red) flags with the ATO.

Then again................you could drive across the Nullarbor to undertake business activities on your Melbourne developments whilst you are in log book documentation period...................not advice, just a thought...............

 

I was hoping to buy a second hand SUV and claim it as a business expense.. I am a sole trader.. Are you saying I need to log the first three months as 100% business trips?

 

Ownership structure doesnt determine whether something is deductible or not. Deductibility depends on the connection to the production of income.

 

Terry is correct.
Another point, is the vehicle FBT exempt?
I see a lot of the time clients buy in a structure and the FBT add back amounts basically kill any benefit of holding the asset in that structure to begin with.

 

Does your taste in cars fall under the luxury tax $59k threshold?

Luxury tax + FBT will generally kill the deal.

We will probably buy a 'company' car one day but it is likely to be a FBT exempt car like a ute.

This is the current list of FBT except vehicles - there are some rather nice vehicles on there which aren't simply utes

FBT - exempt motor vehicles | Australian Taxation Office

 

MTR all my cars have always been owned by my businesses.

Another Thing to consider is that you get hit with a company fine for traffic infringements. Speeding etc... There is an extra $400 added to the fine. Only on cameras and you don't lose demerit points. If you are pulled over personally though you lose points and there is no option to just pay the corporate fee and keep the points.

 

In which case the logbook would show private use not business use.....Fail.

 

Some commercial vehicles may be classified as "FBT exempt" provided the private use is minor. Where it is not minor a logbook may still be required. Its a misconception to think it is automatically exempt.

A logbook is now virtually mandatory for cars and its not as simple as completing one and it last 5 years. If the useage changes from when a logbook is completed it may need to be redone. A good example of this is where a vehicle logbook shows 100%. Given that a person driving daily would need to go home each day and then travel to work this is easily attacked on review.

Deductions are not automatically 100% and neither is GST. A car subject to LCT will NOT be eligible to a 100% GST claim and depreciation may be limited. There will also be GST issues with trade in ete or GST adjustments if use changes etc.

In NSW failure to nominate a driver for point offences with a company owned car can result in a $11,000 fine. Many costs increase when a company owns the vehicle. eg greenslip, rego, insurance and even interest. The reportable fringe benefit impact may / may not affect levies and issues like FTB and HELP debts etc

 

Dont go to the footy in it.

ATO cracks down on utes after helping make Hilux a best seller

 

I hear you, however my accountant has many of his developers doing the same, claiming 100%, he explained what I need to do, which will be above board and I don't personally have any issues with it.

I know another developer on PC doing the same and his accountant recommended similar set up.

I wont go into it on the forum.

The only issue is I want to buy a Mercedes 4WH and will cost me more than $59,008.
I still have my deductions upto the threshold and claiming business so I am still in front I expect.

MTR

 

Don't forget you can claim anything at all - until you are audited.

 

Terryw, I understand this completely, I have already asked the appropriate questions, and this one was number 1 on the list.

My accountant is very conservative and I have my bases completely covered, otherwise I would not be going down this road.

MTR

 

Very good points @Paul@PFI . I have a question about the 'going home each day'. If your business is operated out of your house then would the ATO consider you as driving to work or driving to home? Or is this private ruling area

 

ATO cracks down on utes after helping make Hilux a best seller

Article on this issue today. Ignore the footy reference. Media hype.

Westminster - Depends if home is a place of business or a home office and if personal services rules apply. If home is a place of business it likely means much lower private use.

 

FBT
A ute may be FBT exempt if minor or infrequent private use. Home to work travel not counted as private use for this purpose.

Income Tax
Travel between home and your usual place of work is private use and your logbook will (should) show this. However, if it is owned by the company and made available for private use then a deduction is still available to the company but FBT applies - see above.

Remember that the FBT rate is 49% ... somewhat defeats the company income tax deferral at 30%. Also, penalties for FBT non-compliance make income tax issues seem irrelevant.

If you are a tradie who has a contract to work on a particular building site for a few weeks then that site is your usual place of work and you are commuting when you leave home - private use.

Too many think that not having a "permanent" place of work means that home is a business base of operations and then all travel to the worksite is deductible.

Is your definition of a "conservative" accountant merely one who does not recommend any scheme that is more risky than most others are recommending?

Or is it one who actually researches the law and Commissioner's practice/rulings/guidance?