Edited version of private advice

Authorisation Number: 1052232229655

Date of advice: 19 March 2024

Ruling

Subject: GST - vehicle deductions

Question

Is the utility vehicle a car for the purposes of section 40-230 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

This ruling applies for the following period:

Year ending 30 June 20YY

The scheme commenced on:

1 July 20YY

Relevant facts and circumstances

You are a registered company.

You are registered for Goods and Services Tax (GST) and are carrying on an enterprise.

In the ordinary course of undertaking your business activities, you are required to tow around and transport heavy machinery.

In the relevant year you financed the purchase of a utility vehicle.

The purchase price is above the 2023-24 car limit of $68,108

The vehicle is a dual cab, that has an unladen mass of 2583kg, and a gross vehicle mass (GVM) of 3300kg.

The vehicle seats 5 people.

The vehicle has a payload of 717kg.

You intend on installing a GVM upgrade that will increase the payload to over 1 tonne.

This upgrade is necessary for business use, as the machinery to be transported requires a payload of at least one tonne.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 40-225

Income Tax Assessment Act 1997 section 40-230

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

Subsection 40-230(1) of the ITAA 1997 states that:

The first element of the cost of a car designed mainly for carrying passengers (after applying section 40- 225 and Subdivision 27-B) is reduced to the car limit for the financial year in which you started to hold it if its cost exceeds that limit.

'Car' is defined under section 995-1 of the ITAA 1997 as a motor vehicle (except a motorcycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers.

If the vehicle you have purchased carries less than 9 passengers and has a payload capacity of less than 1 tonne it is classified as a car and will be subject to the car cost limit stipulated in 40-230 of the ITAA 1997.

The one tonne limit relates to the maximum load your vehicle can carry, also known as the payload capacity. The payload capacity is the gross vehicle mass (GVM) as specified on the compliance plate by the manufacturer, reduced by the basic kerb weight of the vehicle.

The vehicle has a payload capacity of 717kg and can carry 5 passengers.

The vehicle meets the definition of a car under section 995-1 of the ITAA 1997 on face value as it is designed to carry a load of less than one tonne and carry fewer than nine passengers.

The Australian Design Rules (ADR) must also be considered in determination if the vehicle is designed mainly for carrying passengers.

Article 4.5.2 of the ADR outlines that:

A vehicle constructed for carriage of both goods and persons, shall be considered to be primarily for the carriage of goods if the number of seating positions times 68kg is less than 50 percent of the difference between the gross vehicle mass and the un-laden mass.

Applying the above test to your circumstances, the vehicle has 5 seating positions, meaning the passenger carrying capacity is calculated to be 340kg (5 seating positions x 68kg). The vehicle has a payload of 717kg, with 50% of that payload equating to 358.5kg.

Therefore, as the passenger weight of 340kg of the vehicle is less than 50% of the payload, the vehicle is determined to have a principal purpose of carrying goods and not passengers.

Consequently, it will not be subject to the car limit under section 40-230 of the ITAA 1997.