Julia wants to buy a car
Julia wants to buy a car
Once upon a time, there was a small business owner named Julia. She wanted to buy a motor vehicle for her business, but her accountant left her completely confused with all the GST rules. After some careful note-taking, Julia came away with the following key points:
Buying a Motor Vehicle
If you are registered for GST, you can claim a GST credit on the purchase.
The seller must also be registered for GST. For second-hand cars, this makes a difference - you can only claim a credit if the seller is registered.
The maximum GST you can claim (2025/26) is $6,334. This is 1/11th of $69,674) which is the car cost limit for depreciation.
If you use a chattel mortgage, hire purchase, or loan, you can claim the full GST amount upfront.
If you lease, you can only claim the GST on the lease payments.
Selling a Motor Vehicle
If your business is registered for GST, the sale price of your vehicle automatically includes GST.
You must pay 1/11th of the final sale price to the ATO.
This also applies if you trade in a vehicle.
Even if the buyer is not registered for GST, the sale price still includes GST because you are registered.
With this knowledge, Julia finally understood how GST applies to motor vehicles. She was able to make a clear and informed decision.
Happy driving!