Many people wonder if they can buy a car through their company or trust. My short answer is yes. However, there are several factors to consider:

• What type of vehicle are you buying?
• Does the vehicle attract Fringe Benefits Tax (FBT)?
• What is the vehicle’s purchase price?
• How much GST can you claim on the purchase?
• What tax deductions apply?
• Will you use cash or finance the purchase?

Vehicle Type and Fringe Benefits Tax (FBT):

Purchasing a work vehicle (ute, van, etc.) may be exempt from FBT. On the other hand, if you’re eyeing a new SUV, it will likely be subject to FBT.

For example, a common method for calculating FBT is 20% of the GST-inclusive purchase price. Take a Toyota Prado Kakadu with a listed price of $94,916. The FBT calculation would be:

• Fringe Benefit Amount: $94,916 x 20% = $18,983.20
• Grossed Up for Tax Calculation: $18,983.20 x 2.0802 = $39,488.85
• Tax Amount: $39,488.85 x 47% = $18,559.76

Thus, the annual FBT for the Prado would be $18,559.76. This is the tax you pay each year for owning the vehicle through a company or trust. There are ways to reduce this.

Next week, I will talk about buying an electric vehicle in your business. 

Stay tuned for next week. Same Bat-time, same Bat-channel.