With 30 June fast approaching decisions on motor vehicle acquisitions are never too far away

February 24, 2017  by Oggy Georgiev - Business Services Manager

From 1 July 2016 the following car threshold changes apply to Motor Vehicle activities.

 

Income tax

There is an upper limit on the cost you can use to work out the depreciation for the business use of your car or station wagon (including four-wheel drives). The maximum value you can use for calculating your claim is the car limit (irrespective of any amount you were paid for a trade-in) in the year in which you first used or leased the car is set at Law.

The car limit for 2016-17 is $57,581.

Vehicle Depreciation Rate – Commissioner's Estimate

Vehicle designed to carry a load of less than 1 tonne and fewer than 9 passengers Effective Life (Years) Diminishing Value *
Generally 8 25%
Hire & travellers' cars 5 40%
Taxis 4 50%

Luxury car tax

From 1 July 2016 the luxury car tax threshold for luxury cars increased to $64,132.  The threshold for fuel efficient luxury cars for 2016-17 remains at $75,526.  Note: The value for Luxury Car Tax includes the value of any parts, accessories or attachments supplied or imported at the same time as the car.

Goods and services tax (GST)

Generally speaking, if you purchase a car and the price is more than the car limit, the maximum amount of GST credit you can claim is one-eleventh of the car limit amount.  You cannot claim a GST credit for any luxury car tax you pay when you purchase a luxury car, regardless of how much you use the car in carrying on your business.

There are some circumstances that you can claim a GST credit for the full amount of GST included in the price of a car, even if the car costs more than the car limit. The car must be used in carrying on your business and at least one of the following conditions must be met:

  • you hold the car solely as trading stock, other than holding the car for hire or lease
  • you carry out research and development for the manufacturer of the car
  • you export the car in circumstances where the export is GST-free
  • it is an emergency vehicle
  • it is a commercial vehicle that is not designed for the principal purpose of carrying passengers
  • it is a motor home or campervan
  • it is a vehicle specifically fitted out for transporting disabled people seated in wheelchairs (unless the sale of the car was GST-free).

If you lease a car, you may be entitled to claim a GST credit for the GST included in each lease payment, based on the amount you use the car in carrying on your business. The amount of GST credit you can claim for GST included in the lease payments is not limited to one-eleventh of the car limit.

If you purchase a second-hand motor vehicle from someone who is not registered for GST and you are purchasing the vehicle to sell or exchange it, you may be entitled to claim a GST credit. If the cost of the vehicle is more than $300, you can claim the GST credit when you sell the vehicle, provided the sale of the vehicleby you is a taxable sale. The credit is the lesser of either:

  • one-eleventh of the amount you paid for the vehicle
  • the amount of GST payable when the vehicle is sold
  • If you purchase a second-hand vehicle from someone who is not registered for GST and you don’t plan to sell or exchange the vehicle, you cannot claim a GST credit.


Disclaimer: The contents herein are intended for general information only and should not be construed as legal or accounting advice. Vicca Chartered Accountants Brisbane bears no responsibility for any loss that might occur from reliance on information contained in this publication. Please do not reproduce, transmit or distribute the contents herein in any form without prior permission from Vicca Chartered Accountants,
Taxation Accountants Brisbane Australia.

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