Considering buying a car for your small business?

Considering buying a car for your small business?

Small businesses can claim a deduction for individual assets that cost less than $20,000.

The changes mean you can claim a deduction for:

• each asset costing less than $20,000
• new and second hand assets
• assets acquired after 7.30pm on 12 May 2015
• assets acquired up until 30 June 2017, when the threshold will return to $1,000.

The tax concession is only available if you use the car in running your business. Note that if you purchase a car in the business name and the car is used by any employees, you may have to pay fringe benefits tax (FBT).

What information do I need to keep?

Keeping a log book is the best way to prove that you are using the car to run your business, and can reduce the amount of FBT payable. You should detail all business travel for a period of at least 12 consecutive weeks showing:

• dates of travel
• odometer readings at the start and end of any trips
• the kilometres travelled, and
• the reason for the trip.

For FBT purposes you may also need to keep odometer readings at the start and end of each year, along with details of the operating costs for the car.

Things to keep in mind

• Be aware that home-to-work travel is generally considered to be private travel.
• Where a car is garaged at or near an employee’s home, the ATO considers the car to be available for the employee to use, regardless of any actual private use.
• Company directors are generally treated as employees. So if the company owns the car, and the directors use the car for private purposes, then FBT could also apply.

Find out more

• Accelerated depreciation for small business
• Car fringe benefits

Source: Australian Taxation Office