Vehicles and Tax
The treatment of vehicles within your business depends on the business structure you operate under. As a company is a separate legal entity, vehicle usage is completely different from a partnership or sole trader.
Partnership or Sole Trader – Sometimes vehicles are used partly for private purposes and partly for business purposes. In those cases clients need to maintain a log book to justify the percentage for each. That log book needs to be kept for 3 months and the percentage can then be applied for the following 3 years. Once the correct business percentage is known, this can then determine the amount of GST on purchase and running costs that can be claimed.
Companies – As a company is a separate legal entity the availability of company vehicles for private use can create a Fringe Benefit Tax obligation. Some clients have vehicles which are 100% business, and never used (or available) for private use. Others have staff/shareholders with signwritten work related vehicles (eg. utes) which staff are allowed to store at home. Those clients claim 100% of the vehicle’s costs with no private adjustments.
However, for some clients who do use the vehicle privately, we have the option of them owning the vehicle privately and having actual business related costs reimbursed from the company; owning the vehicle privately and being reimbursed based on the approved mileage rates; or the company owning the vehicle and having us complete a “shareholder contribution” adjustment. This adjustment is income to the company, and partly offsets the depreciation and running costs claimed for the vehicle. In effect it treats the first amount of cost (being 20% of vehicle cost price) as private, and the amounts over and above that are claimed as a tax deduction.
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