Private companies providing vehicles to a shareholder or their associate (not as an employee), may have to treat the use as a dividend or loan and related motor vehicle expenses may not be deductible.
If your business is a private company and you provide a vehicle to a shareholder or their associate (not in their role as an employee):
- we may treat it as a dividend or loan
- your related motor vehicle expenses may not be 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 a four wheel drive vehicle and ABC pays for all lease, petrol, insurance cover premiums, repairs and fuel costs.
The car payments made by ABC on Peter's behalf are:
- taken into account in working out his share of ownership profits
- not incurred as a business expense of ABC, so can't be claimed as a deduction by ABC.
See also:
- Division 7A – Payments by private companies