Cars - Companies & Trusts

There are different Tax & GST treatments depending on the type of car you purchase and the entity type that purchases it

These rules apply to Companies & Trusts

Other Vehicles

These are motor vehicles which ARE NOT designed principally to carry passengers
Examples: van, single cab ute

Some vehicles i.e. dual cab utes can be either a Car or Other Vehicle so the specifications need to be reviewed

Cars

These are motor vehicles which are designed to carry both:
-a load less than one tonne
-fewer than 9 passengers

Examples: sedan, SUV

If unsure as to what type of vehicle you are buying speak to your accountant BEFORE buying it
 

TAX

Other Vehicles (not designed principally to carry passengers)

Depreciation deduction limits DO NOT apply

Under $20,000 (purchased between 01/07/2023 - 30/06/2025)
Under $1,000 (purchased between 01/07/2025 - 30/06/2026)

If your company / trust business (small business entity) buys a car for less than $20,000 (pre 30/05/2025) / $1,000 (post 01/07/2025) (net of GST) then the business use portion * is fully deductible when purchased

The car must be delived by 30 June if you want to claim the deduction in that particular tax year

Over $20,000 (purchased between 01/07/2023 - 30/06/2025)
Over $1,000 (purchased between 01/07/2025 - 30/06/2026)*

If your company / trust business (small business entity) buys a car for less than $20,000 (pre 30/05/2025) / $1,000 (post 01/07/2025) (net of GST) then car * is added to the general asset pool and depreciated at 15% in year 1, then 30% in year 2 onwards

The car must be delived by 30 June if you want to claim the deduction in that particular tax year

* Business use is 100% provided private use is minor, infrequent & irregular (i.e. less than 1,000km per year & 200km in any one trip). Home to work is normally a private trip BUT not counted for this purpose. If private use is more than that then we recommend you preare a log book to determine the private use adjustment (see below)

Cars (designed principally to carry passengers)

Depreciation deduction limits DO apply

Under $20,000 (purchased between 01/07/2023 - 30/06/2025)
Under $1,000 (purchased between 01/07/2025 - 30/06/2026)

If your company / trust business (small business entity) buys a car for less than $20,000 (net of GST) then it is fully deductible when purchased

The car must be delived by 30 June if you want to claim the deduction in that particular tax year

 

Over $20,000 (purchased between 01/07/2023 - 30/06/2025)
Over $1,000 (purchased between 01/07/2025 - 30/06/2026)

If your company / trust business (small business entity) buys a car for more than $20,000 (net of GST) then the car is added to the general asset pool and depreciated at 15% in year 1, then 30% in year 2 onwards 

Note that depreciation limits apply (see below) in that there is a maximum than can be added to the general asset pool - the remainder is not tax deductible

The car must be delived by 30 June if you want to claim the deduction in that particular tax year

 

GST

Other Vehicles (not designed principally to carry passengers)

GST limits DO NOT apply

If your company / trust business (small business entity) pays GST as part of a car purchase then the GST is fully claimable

When GST is claimable depends on whether you are registered on a cash or accrual basis and how it is financed

 

Cars (designed principally to carry passengers)

GST limits DO apply

If your company / trust business (small business entity) pays GST as part of a motor vehicle purchase then the GST is fully claimable subject to the GST limit (see below)

When GST is claimable depends on whether you are registered on a cash or accrual basis and how it is financed

 

Depreciation limits

 

2024 $68,108
2025 $69,674 (ATO link)

GST limits

2024 $6,191
2025 $6,334 (ATO link)

Private use adjustment

• If your car has private use then you must make an adjustment in the books
   

• Directors

  • You can make adjustment to loan a/c (recommended) OR you can elect to pay fringe benefits tax
  • Use the lower of:-
    • statutory method
      • 20% x car cost
    • operating method
      • log book % - must provide work use %
      • your car expenses need to be kept separate in the bookkeeping file
      • Journal (must be done in Q4) as follows
        • Debit director loan - note this may cause Div7A issue
        • Credit GST payable (owing to ATO)
        • Credit fringe benefit adjustment (income)

• Employees

  • you CANNOT make an adjustment to the director's loan account - you MUST do the following each FBT year (01/04 - 31/03)

  • P​​​repare fringe benefit tax return - use the lower of 
    • statutory method
      • 20% x car cost
    • operating method
      • ​​​​​​​log book % - must provide work use %

      • your car expenses need to be kept separate in the bookkeeping file