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Leasing a car through my business

Discussion in 'Accounting & Tax' started by Brian84, 4th Nov, 2015.

  1. Brian84

    Brian84 Well-Known Member

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    Hi Everyone,

    I have had my business for around 10 years now and I have always purchased my vehicle privately. I was wondering if any accountants can tell me the actual benefits of leasing a vehicle as apposed to purchasing privately.

    Is it actually going to save me any money or save me any tax.
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    Depends on the car eg: ute has no fbt iirc

    Are you already claiming the running costs?

    Are you doing mega km?

    How much business use vs non-business?
     
  3. Brian84

    Brian84 Well-Known Member

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    Hi Scott,

    Yes it will be a ute.
    I don't know what fbt or iirc is.

    It will probably be about 90% business
    I do approx 25000kms a year.
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

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    Fringe benefits tax - If I recall correctly
     
  5. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    There is a lot of incentive to buy the car through a dealership and get the lot financed. I do this in my business and set up the minimum repayments to assist with my borrowing capacity and then I will have a higher balloon or to repay the loan when I want (within the loan term).

    Rates are also super competitive (high 4%'s) and most lenders don't even require financials assuming you meet very basic requirements.

    I will leave it to the accountants to comment but you would be able to claim depreciation on the asset which helps (also helps with servicing).
     
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  6. bob shovel

    bob shovel Well-Known Member

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    What @Shahin_Afarin dais makes sense

    With leases they work out Coast effective vs buying but you need to be aware what you sign up to and Min/max km's etc

    It may depend how much you want to spend too? Are you after a hoon Ute? SS or just a bog stock hilux? Plus find out about ladder racks and mods you plan to do
     
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  7. MRO

    MRO Well-Known Member

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    Are you buying from a dealer? The business may be entitled to claim GST - making your vehicle 10% cheaper. (GST will also apply when you sell it)
    At 90% business use the FBT cost would be minimal.
    Get some formal advice but I would think it is probably better to have the vehicle purchased by the business.
     
  8. Brian84

    Brian84 Well-Known Member

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    I'm looking to get a ford ranger. I have an extra cab hilux at the moment but I'm looking to get a dual cab ranger. I like the look of the new Rangers and have heard they go good to.
     
  9. bob shovel

    bob shovel Well-Known Member

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  10. Brian84

    Brian84 Well-Known Member

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    3500kg brake towing
    750kg not brake towing.
     
  11. Brian84

    Brian84 Well-Known Member

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    I wouldn't be towing as much as 3500 anyway
     
  12. wogitalia

    wogitalia Well-Known Member

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    Several things to consider mate and hard to give detail from the information you've given.

    Firstly... the term leasing has several meanings and the different meanings have very different results.

    From a tax perspective technically leasing is to "hire" the vehicle, it's not common in Australia but if this is what you mean then you get a deduction for each payment and can claim GST on each payment (if you're registered). Again, this is very uncommon and generally when people say lease they mean finance so I'm going to advance from here assuming this.

    I'm going to ignore FBT (fringe benefits tax) because you've said you plan to buy a commercial vehicle (ute), the only disclaimer is make sure it meets the FBT exemption requirements, generally a Gross Vehicle Mass greater than 1 ton (this is most real utes) otherwise FBT can quickly wipe away most of the benefits.

    First benefit of buying in the business will be the GST benefit (again assuming you're registered). If you finance under a chattel mortgage (the most common form of finance by far) you will be entitled to claim 10% of the purchase price (give or take, there is no GST on the stamp duty portion) on the BAS for the quarter you bought it in. That's a great start.

    You will be entitled to claim depreciation at either 25% or 30% (depending on if you qualify for and use the SBE concessions) and if the vehicle is under 20k you might get an immediate write off. On a $50,000 that's a 10k+ deduction. Again a significant amount.

    You will also be able to claim other expenses (fuel, servicing, registration and insurances the main ones) in the business and generally get the full deduction for these as well.

    The interest on the finance is also deductible though obviously as dead money it's the kind of deduction you should minimise as much as possible. It's not impossible to get finance in the sub 2% range right now, so shop around for the best deal.

    Just be aware that when you dispose of this vehicle you could be assessable on any gain (unlikely with cars) and will have to pay GST on the sale price. Generally though it will be a loss on disposal if you hold it a couple of years and the GST payable will not be nearly enough to offset all the gain of having it in there.

    The only other negative is that the asset becomes the companies (I've assumed you're in a corporate structure for all of this otherwise the distinction between business/private is more of a practical than legal distinction) so in the event that the business fails the asset will be in the hands of the liquidators and not protected by the corporate structure like it probably would be if owned outside. This is a pretty minor concession, especially if you're confident in your business and it sounds like you've been doing it for a while now.
     
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  13. D.T.

    D.T. Adelaide Property Manager Business Member

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    I'd like a ute for my business and to save on FBT (mostly for my own renos but shhh), how do I convince the accountant that a property manager requires a ute? :p
     
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  14. Xenia

    Xenia Adelaide Property Manager Business Member

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    we lease all our cars through business and upgrade them every 2-3 years or when they have reached around 70,000 km.
    Tax agent works out the benefits, I just like the luxury of always having a new car :)
     
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  15. Brian84

    Brian84 Well-Known Member

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    Wow that's a lot of info to take in lol. I may have to read it again. All sounds pretty good what you are saying. I am registered for gst also.

    I will post my plan soon what I want to do and can you tell me if its doable.
     
  16. Brian84

    Brian84 Well-Known Member

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    It is nice always driving a new car but I would like to keep mine for around 5 years.
     
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  17. Bran

    Bran Well-Known Member

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    I aim for 15, but I am worried it's going to get towed from the car park one day.

    FullSizeRender.jpg
     
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  18. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent

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    Lease the one next to yours :p
     
  19. Brian84

    Brian84 Well-Known Member

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    So here's my plan/situation.

    I have a hilux and a Captiva. I am looking to sell both for $20k each so that's $40k. With the $40k I will use $20k to buy my wife a car one that's big enough for 2 child seats and the other $20k will go towards the new ute which is around $50k. So to make up the $30k being the $50k-$20k deposit I will lease and have the lease set up so at the end there will be a $10k balloon so then I will only be making repayments on $20k lease.

    Will this work out and does it make sense.
     
  20. D.T.

    D.T. Adelaide Property Manager Business Member

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    You have to weigh up trade in price vs depreciation I think.

    E.g. 50k car gets 40k after 2 yrs but 15k after 5 yrs. Trade in for 50k new one and repeat process.

    First person is essentially spending 5k per year. 2nd personal essentially spending 7k per year.

    Obviously different cars hold their value differently but you get the idea. Depends on how many kms you rack up too. I've done about 11k in the last quarter.