What name should I purchase the vehicle in?
If the car is in your personal name you can claim a tax deduction on the car expenses where the car has been used for business purposes. If the car is purchased by the company, the company should be able to claim 100% of the annual running costs, depreciation, and interest cost. However, fringe benefits tax will need to be factored in.
Should I buy new, used or certified?
Buying new means higher prices, better reliability, newer features and up to 20% depreciation once you buy. Used means lower initial cost, questionable reliability, low residual value and cheaper insurance premiums. Certified used is the best of both worlds. These are dealer-refurbished cars with low kilometres, one prior driver and reasonably high residual value.
The decisive factor here is determined by your car’s primary use and how long you intend to keep it. If your business needs a vehicle for the long-term then it makes sense to buy a vehicle with high residual value, at the top of its lifespan. If your business only uses a car occasionally, then a used car that won’t gather much wear and tear makes more sense.
Cost of car
Small businesses with turnover of less than $2m are entitled to claim 100% accelerated depreciation on the car cost providing the cost is less than $20,000 (GST inclusive). This is only available until June 2017.
Luxury car tax
If the car you purchased is more than the current luxury car limit (approx $57,500), your tax deduction and GST credit will be capped at this value. Therefore the maximum car depreciation you can ever claim on the car will be capped at $57,466 and the maximum GST credit allowed is $5,224. Therefore, there is no great tax or GST benefit in buying a car over the luxury car limit.
If you are paying for your employees fuel as well as the car, you’ll want to choose a car that is relatively economical to run.
Don’t forget, it’s always a good idea to consult a financial professional before making any purchases.