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  • Claiming motor vehicle expenses in a company or trust

    A company or trust can generally claim expenses for a motor vehicle owned or leased by your company or trust as long as the expenses are incurred as part of the everyday running of the business.

    These expenses can include the costs for providing a motor vehicle to an employee (or their associate) as part of their employment.

    If any employees (or their associates) use the vehicle for private purposes, the company or trust may have to pay fringe benefits tax (FBT). The FBT cost is also tax deductible.

    The company or trust may be asked to show how the expenses were connected to the business.

    Example: Motor vehicle expenses related to employment

    Habib has a small accountant consultancy business he runs through his company, Beetle Pty Ltd. Habib is the sole director and worker in his business.

    Beetle has entered into a four-year lease for a four wheel drive vehicle with a carrying capacity of less than one tonne that Habib uses for both business and private purposes.

    Beetle is entitled to claim a deduction for all of the lease payments and other expenses incurred in ensuring that Habib has a motor vehicle to use for his business and private activities.

    For the portion of private use of the vehicle, Beetle may have to pay FBT. Any FBT that Beetle pays is also tax deductible.

    Example: Non-deductible motor vehicle expense

    Peter owns 60% of ABC Pty Ltd. Peter doesn't work in the business and isn't an employee.

    As part of the original ownership agreement, Peter has an arrangement where he is entitled to the use of four wheel drive vehicle and ABC pays for all lease, petrol, insurance, repairs and fuel costs.

    The car payments made by ABC on Peter's behalf are taken into account in making up his share of ownership profits.

    The car payments made by ABC are not incurred as a business expense of ABC and are not deductible to ABC.

    End of example
    Last modified: 08 May 2018QC 44461