As we are mid-way through the final quarter of the 2018 financial year and quickly coming into EOFY, many business owners are turning their thoughts to upgrading their business vehicle.
We have put together the top 7 tips to remember when purchasing a vehicle for your small business, to maximise your GST on motor vehicle claim –
- You require a valid tax invoice in order to claim the GST on the new car purchase.
- Your GST claim is limited to the GST included in the cost of the vehicle to an upper limit of $5,234 or 1/11th of the car cost limit for depreciation ($57,581 for the 2017-18 financial year)*.
- If you operate as a sole trader, your proportion of the GST credit you can claim is limited to the % that the vehicle is used (or planned to be used) in your business.
Example – Roger plans to use the car only 50% in carrying on his business, so he would report $28,733 at label G10 and include $2,612 (50% of $5,234) at label 1B.
- If you do trade-in an existing business vehicle that was claimed under the log book method, you may need to remit GST on the sale consideration.
Make sure you budget for GST on the sale of your old business motor vehicle, otherwise you may be out of pocket 1000’s come BAS time.
- How you finance the purchase of the car can affect the timing of when the GST on the purchase can be claimed –
- If you lease a car, you may be able to claim a GST credit for the GST included in each lease payment as they are paid.
- If you purchase the vehicle using a hire purchase, you can claim the full GST credit on the HP agreement in the period you make your first payment or receive the tax invoice. After 1 July 2012, all components of the HP are subject to GST including any interest & associated fees.
- A vehicle financed via a chattel mortgage, business or personal loan or straight out purchase, falls under the usual GST credit rules meaning GST is claimed when the purchase is paid or an invoice is received (Accruals basis only).
- Record Keeping Tip – keep your purchase & finance documentation. Utilise electronic storage in Xero, ReceiptBank or Hubdoc for storing records your Accountant will need to see at year end.
Remember, this is the final year that the $20,000 instant asset depreciation write-off is available, so have a chat to your accountant about how this may be beneficial for you and apply our GST tips to make the most out of end of financial year.
If you would like to find out more about GST and your business vehicles or would to discuss a bookkeeping package for your small business, then book a free 15min consultation here.