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  • Claiming motor vehicle expenses in a company or trust

    If you operate your business as a company or trust you 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 your business.

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

    When working out your claim, you must use the actual costs for the motor vehicle expenses. Actual costs are based on receipts for all expenses incurred. You can use a logbook or diary to separate private from business-related trips. You can't use other methods (such as, the cents per kilometre or logbook method) to calculate your claim.

    Motor vehicles owned or leased by your business

    Your business can claim a deduction for the running expenses of a motor vehicle your business owns or leases.

    If an employee or their associate (such as a spouse) uses the vehicle for private purposes:

    • your business may have to pay fringe benefits tax (FBT)
    • the private portion of the expenses that are subject to FBT are tax deductible
    • the FBT you pay is tax deductible
    • you may be asked to show how the expenses were connected to the business.

    If a private company provides a vehicle to a shareholder or their associate in a capacity other than as an employee, it may be treated as a dividend or loan (Division 7A) which could impact on the deductibility of your motor vehicle expenses.

    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 ias the motor vehicle was provided to Habib to use for 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.

    End of example

     

    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

    Motor vehicles owned by employees

    If your employee uses their own vehicle as part of the everyday running of your business, your business can claim a deduction for any motor vehicle allowances or reimbursements you pay them for their costs, such as the cost of fuel.

    See also:

    Last modified: 20 Nov 2018QC 44461