Home – New Forums Money matters Purchasing a car from myself for the business

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  • #979322
    AgentMail
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    As always, I want an answer now, and don’t want to call my accountant at 8pm at night.

    I currently have a car on finance in my own personal name. It still has some money remaining, and a residual/balloon at the end of it.

    I was wondering if it is possible for my company (a pty ltd structure) to buy the car from me, for the amount outstanding on the finace. That way, I can move this currently personal expense into the business, as the car is used for the business anyway.

    Anyone got thoughts or experiences with this?

    #1113565
    Cooke Consulting
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    Hi Agent Mail,

    I can give you some general advice on this I was going to write a reply but it just got far too long :D

    If you can send me a contact telephone number b4 10am I’ll give you a quick buzz before I have to head off for meetings all day. Otherwise I can give you a buzz around this time tomorrow.

    Cheers

    #1113566
    apj
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    Isn’t it interesting how such a simple question like this never seems to have a simple answer!

    The car will be deemed to be sold from you to the company for market value since its a non-arm’s length transaction regardless of how much you actually pay yourself for it. The company will then be able to claim depreciation and running costs (and possibly interest if the company had to borrow to buy it from you) for operating the car though will likely be subject to Fringe Benefits Tax unless its a certain kind of commercial vehicle or you have a log book supporting 100% business use. I strongly suggest you get some advice on your FBT position if you go down this path as it can make or break the benefits of owning a car in a company.

    Selling the car to the company will incur stamp duty on the market value of the car which can be quite expensive. Again this will be at the deemed market value. There may also be a depreciation balancing adjustment for tax purposes if you’ve previously claimed the car personally for tax purposes.

    From your own point of view you could likely claim a deduction for the business use of the car using one of the four available methods (cents per km / 1/3rd of cost / log book / 12% of cost) so can I ask why you think its necessary to transfer it to the company to get a better tax outcome?

    Why not simply leave things as they are and have the company pay you a car allowance. The allowance will deductible to the company with no FBT, assessable to you and you can then offset this income in your own name with your work related car expenses unless one of the four methods I mentioned. Probably a lot simpler overall. The only downside is missing out on a few GST input tax credits on the car operating costs though in the scheme of things these are not likely to be material or outweigh the costs of setting up this scheme.

    Hope this helps.

    Cheers
    Aaron

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