Company buying a 2nd hand car from dealer - GST credits

Hello - question isn't related to property but it's right up you guys' alley

I run a business - it's a GST registered pty ltd company, so I can claim GST credits.

If the company buys a 2nd hand car, for say $33,000, from a reputable dealer that is GST registered, will that give the company $3000 GST credits?

If yes, then why would I ever consider buying from a private seller as opposed to a dealer? What am I missing here?

 

Yes you pay GST and can claim a GST credit when buying from a dealer.
A private seller won't charge GST because they are not registered for it, so you can't claim it back either.

 

Thanks - this is what I thought.

And on carsales, the price quoted is the 'drive away' price, so GST, if charged, would be included and not some hidden-away add-on figure. And the drive away price for cars of the same quality (year / model trim / kms etc) are the same for dealer vs private seller - so unless I'm missing something here, I have a huge incentive to buy from a dealer.

 

1. Yes, $3k GST credits.
2. You would consider buying privately if the car was more than $3 cheaper than the dealer's price, which is typically the case with dealer prices vs private

3. What type of car is it you are buying. Have you considered why you are buying it in a company? I hope it is not just to get the gst back.
If it is not an FBT exempt vehicle then you will potentially have to pay an FBT reimbursement back to the company.
On a simple statutory method this would be:
$6,600 gross
So $600 gst payble and $6000 of taxable income at 28.5% is $1,710 in tax
So year 1 already up to $2,300 paid back to the ATO out of the $3000 you claimed back.

Be careful when purchasing vehicles in company and trust structures.
My example is not complete (deductibility of vehicle expenditure and depreciation etc), so no need to correct me, but the point remains.. most of the time it is not beneficial to buy in a trust or company.

 

Thanks for the insight - I've found your point 2. to be not true from recent shopping around - but may be the case with different models. I'm fine with point 3 and other tax-law related considerations.

Actually I'm worried about ways the dealer can structure the sale such that I don't get my GST credits - e.g. if they're selling on consignment as agent for a private seller, or if they somehow get to deduct their cost of goods (e.g. if the dealer bought it from someone doing a trade-in, for 20,000, and sells it to me for 25,500, will there be only (25500-20000)/11 credits instead of the full 25500/11 GST credits - etc.

 

I think you might be confused about how gst works.

 

You are overthinking it.
30k plus gst of 3k will be on the invoice...

 

What does the tax invoice say ?
No tax invoice = no credits can be claimed.
No logbook no credits can be claimed (unless a exempt vehicle)
If there is private use the credits entitled may be reduced.
Did you trade in ? That will also have a GST impact if its a vehicle you claimed expenses for.
GST doesnt apply to the net price. The purchase and trade in are two distinct events.

Car sold privately arent $3K cheaper due to GST being absent. Cars are worth what the market is. Cars sold by dealers are subject to GST. This creates a profitability issue for dealers. So there are special rules for second hand goods which reduce the impact of this pricing issue for sellers of used goods that they buy.

 

Cars sold privately sent cheaper due to gst consideration. They are cheaper because dealer has to make a margin on the sale. Yes he will buy cheaper than market value, but usually sells slightly above too, thus making a profit.
Like any other business, it needs to cover direct costs (vehicle etc) and the rent of the yard and staff. So of course cars are dearer at a dealer.
Plus general public are not salesmen, they don't generally have a bottom line (cost) that the dealer has, so sale is based on a number of other factors (usually non financial).

 

If that is correct then lets use land as a homogenous product that may or may not have GST.
Two sites in same area of suburb. Same size etc. One is cleared by Neville and he selling it with GST using the margin scheme. Next door is Bettys old house ready for demo IF you choose or its a fix er upper.

Which costs more ?

A : Both are similiar. Bettys made be fractionally cheaper for the estimated costs to demo. But fundamentally the GST on the sale doesnt affect the market value. What occurs is the buyer modifies their view of the market value based on buying costs. If it did the person who pays more for the same product is a mug.

Its why most dealers dont sell older cars. They are competing with private sellers for same price and cant add value other than warranty etc. Or great selling skills and add ons. (Or rip someone off with a lemon dressed like a mango)

This issue is less evident but same in the car industry. Its a reason why dealers can claim GST on cars they trade that dont have GST in the cost (ie if I trade in) !!! Its an attempt to equalise for the GST issue when selling used cars v's private sellers.

Applies to all second hand goods. Similar rule for caravan parks too....The rule is modified to 5% GST. Caravan parks charge residential rents that are subject to GST this way. The 5% is a concession.

 

Thanks - was never aware of this rule - do you mind pointing me in the right direction to read more about this?

 

GST Second hand goods....google
Or get tax qualifications. Google is cheaper and faster.