Want to buy a car in your business? Cont’d

𝐓𝐡𝐞 𝐏𝐮𝐫𝐜𝐡𝐚𝐬𝐞 𝐏𝐫𝐢𝐜𝐞, 𝐓𝐚𝐱 𝐃𝐞𝐝𝐮𝐜𝐭𝐢𝐨𝐧𝐬 𝐚𝐧𝐝 𝐆𝐒𝐓:

Generally buying a motor vehicle, the tax deductions on the purchase price are limited to depreciation. However currently, until 30 June 2023, you can write off the motor vehicle instantly with the Temporary Full expensing rules. 

Please note your depreciation deductions and full expensing is limited to the motor vehicle depreciation limit, for the 2022-23 FY it is $64,741. All costs above $64,741 are not deductible.

Referring to last week's post and Fringe Benefit Tax (FBT), you pay FBT on the whole purchase price, e.g. $94,916 on the Toyota Prado, however your tax deductions are limited to $64,741. 

There is also a cap to the amount of GST you can claim on a motor vehicle. It is capped at 1/11th of the depreciation limit. The maximum GST is $5,885 on the depreciation limit of $64,741

𝐅𝐢𝐧𝐚𝐧𝐜𝐞

Sometimes it's best to finance the vehicle purchase than pay cash for it. A car will usually provide you with a benefit over a number of years, I would recommend paying for it over a number of years as well. Taking a large lump sum of cash out of your business can have a detrimental effect on your cash flow. You may have trouble paying suppliers, paying your staff, and keeping on top of your tax payments.

Each finance option has different tax and GST implications. I will discuss the finance options and tax implications for the next couple of weeks.