Story Time: “GST and your Motor Vehicle”….

Once upon a time…… there was a small business owner, Johnny, who was looking at buying a motor vehicle for his business. His accountant confused the hell out of him with the complications of GST. Below are Johnny’s summary points he made after visiting his accountant:

𝐏𝐮𝐫𝐜𝐡𝐚𝐬𝐢𝐧𝐠 𝐚 𝐌𝐨𝐭𝐨𝐫 𝐕𝐞𝐡𝐢𝐜𝐥𝐞: If you are registered for GST you can claim a GST credit on your motor vehicle purchase, however:

▪️ The person selling the motor vehicle must also be registered for GST. When buying a second-hand car, having that person/business registered for GST reduces the cost of your motor vehicle to your business. You get to claim a GST credit.

▪️ The maximum GST you can claim (in 2022/23) is $5,885. Which is 1/11TH of $64,471, i.e. the cost limit for depreciation.

▪️ If you finance your car using a chattel mortgage, hire purchase or loan. You can claim the whole amount of the GST upfront.

▪️ If you finance your car using a lease, you can only claim the GST on the lease payments.

𝐖𝐡𝐞𝐧 𝐬𝐞𝐥𝐥𝐢𝐧𝐠 𝐚 𝐌𝐨𝐭𝐨𝐫 𝐕𝐞𝐡𝐢𝐜𝐥𝐞: If you are registered for GST the final selling price of your Motor Vehicle is deemed to include GST.

▪️ Selling a Motor Vehicle in your business is a normal sale, which includes GST. You need to pay 1/11TH of the final sale price as GST.

▪️ Selling includes trading in your motor vehicle.

▪️ Even if you sold it to a person who is not registered for GST, the price is still deemed to include GST, as you, the business is registered for GST.

Now small business owner Johnny understands the complexities of GST and motor vehicles, he made an informed decision when making his purchase. Happy Driving!